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How Auto Reconciliation Helps Banks Counter Frauds


As technology advancements continue to drive convenient banking avenues, there is an increasing threat of frauds. With persistent cases of cheating, fraud is an inevitable cost of business which banks can’t stop, but only hope to reduce.

According to Institutional Investor Advisory Services (IiAS), India’s domestic banking sector reported a total of 12,553 fraud cases worth Rs 18,170 crore in fiscal 2016-17. Fraudsters are not only using sophisticated methods to hack into accounts, but have also been able to enter banking system as insiders.

While it is near impossible to ensure complete protection against unknown threats, some level of preparedness from banks can go a long way in countering fraud threats. Along with adopting pre-emptive techniques, banks need to strengthen the audit quality by plugging process gaps and streamline the checks and balances.

It is a fact that reconciliation methods have been in place to identify unusual or suspicious banking activities —be it money transfer data, loan transactions, teller cash exports, ATM transactions data, etc. The reconciliation processes help establish accuracy of data between the balance sheet and the bank statement recorded in the cash ledger. However, massive transaction volumes, process complexities, multiple data sources and evolving regulatory requirements have led to cumbersome reconciliation processes. Most financial institutions still use manual reconciliation processes which are often expensive, time-consuming, error-prone and unproductive.

There is a need for organizations to realize the potential of automating reconciliation. There are a number of financial institutions which by adopting auto reconciliation methods are not only benefiting from faster identification of transactions, quicker highlighting of exceptions and real-time identification of variations and miscalculations in data. With increasing technology adoption and penetration of devices by banks as well as customers, the number of data sources have grown rapidly. It wouldn’t be wrong to say auto reconciliation is an absolute need so as to get a consolidated view of data.

Blending strong authentication processes and analytics software, automated reconciliation can greatly reduce exposure to fraud, and offer an added layer of protection. It allows accurate detection of fraud by tracing every transaction to its source through the financial lifecycle— from data ingestion through matching, exception management, reconciliation, certification and sign-off.

For example, Ascent Business’ reconciliation engine of banking software enables a single reconciliation job execution through distribution of load across various cluster nodes, thus ensuring optimal utilization of the system resources. It is easily scalable to increased transaction volume and user base without re-deploying and extending the solution.

The platform has the ability to bring significant operational efficiency and risk management to the diverse range activities. What matters more is having a solution with the right understanding of cash flow matching, exceptions and investigation cases.

Advantages of Automated Bank Reconciliation

Data tracking: Automating reconciliation helps make data traceable, trackable and transparent, helping banks to check any suspicious activity in real-time.

Eradication of errors: By eliminating manual monitoring and comparison of data between systems and applications, the technology reduces potential risk of discrepancies. By automatically generating real-time email and SMS notifications, it provides another level of security. Automation can reduce the risk of error by as much as 50 percent, according to an analysis by Fiserv.

Better utilization of skilled employees: Reducing the amount of resources placed on manual bank reconciliation procedures through automated reconciliation processes reduces running costs and eradicates associated errors to enable one to focus on investigating exceptions quickly and efficiently.

Transparency: Most manual reconciliation processes don’t provide the history of audit trail that shows how the balance sheet was created. Management is compelled to certify the data without verification, just to comply with regulations. Automated processes helps in bringing transparency about the numbers and build confidence in audited numbers.

Improved operational cost: By auto reconciliation, according to Fiserv, financial institutions see efficiency improvements of up to 80 percent and lowered operational costs.

It’s evident that with increasing data, manual reconciliation is only going to increase the risk of errors that could have irreversible consequences. Automating reconciliation seems to be the most natural next step if banks want to exercise greater control, accuracy and reduce chances of costs attributed to damage control in case of errors in reconciliation.


  • Frauds cost Rs 18,170 crore to banking sector in FY17: Report
  • Top reasons to automate accounting reconciliation — Fiserv
  • Prevention of fraud through internal controls || How to reduce exposure to financial risk

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