Real-Time Liquidity Management: Values to be realized

Published on Payments 101, October 22, 2010

Friday, October 22, 2010

Banks might pursue integrating some of these systems in an equally silo’d fashion, through extensive and expensive systems integration projects, but those approaches are not repeatable, adjustable or easily refinable. Real-time insight cannot be delivered on demand across a diverse spectrum of activities, and real-time actions and responses cannot be automated with any ease or consistency.

Banks can realize savings and reap value from building a cohesive infrastructure that will bring together all this data for greater visibility in real-time, for coordinated responses to issues such as potential shortfalls, and for streamlining workflows related to payments liquidity – indeed, to all transactions that require liquidity. Banks that make this investment can continually leverage the more orderly and procedural methods of doing business atop a shared information and resource infrastructure, driving down individual transaction and ultimately total ownership costs in the process. Good things will flow from there: For instance, if a bank can reduce the cost of processing transactions with readily accessible, real-time data, it can price those transactions more competitively to the market.

Empowering a more real-time, centralized and automated payments liquidity system and processes could also make American banking institutions a more formidable competitor in emerging economies as those countries open up their markets even more. At the same time, improved liquidity management also may help U.S.-based banks deal with existing and upcoming regulations on both sides of the Big Pond. Consider this:

In December, the Basel Committee on Banking Supervision approved for consultation a package of proposals to strengthen global capital and liquidity regulations, with the goal of promoting a more resilient banking sector.

In some European nations, such as the U.K. the financial regulators plan to mandate locally in areas such as liquidity management.

Meanwhile, back In the States, where the worldwide financial crisis was born, banks are gearing up to see what steps Congress may take to overhaul its supervision of U.S. financial institutions, including potential new regulatory powers the Fed may be granted to monitor systems risk and prevent future crises. Those conducting credit and cash management processes on anything less than a real-time or near real-time basis may find themselves to be targets for regulators.

Creating real accountability for payments liquidity – and then establishing a solution to effectively enable its management –is a first step to avoiding potential problems and driving new opportunities.

By: Tony D. Smith, a strategic consultant for the ACI Worldwide wholesale banking products. He was the co-founder of IntraNet Inc. – a leading provider of electronic payment systems for the international banking community – which is now part of ACI Worldwide. Mr. Smith is actively involved in the product planning and management for ACI Money Transfer System™, and sets the strategic direction for ACI’s suite of real-time, mission critical software solutions for the wholesale banking industry.