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"Real-Time" Liquidity Management Values to be Realised

In today’s banking environment, payments data and transactions live on their own islands, separated according to discrete payment businesses or at least discrete geographic units, rather than linked together for holistically serving all these liquidity purposes. 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.

Tony D. Smith

Strategic consultant for the ACI Worldwide wholesale banking products