Stay in front of financial services regulations by automating the requirements now

While the regulatory burden for community organizations is lightening in 2020, intensive scrutiny by examiners is still the expectation. Organizations subject to federal oversight cannot rest easy unless they continuously modernize their automation to meet the challenge.

ACH regulation changes present a workload challenge for financial institutions

The ACH (Automated Clearing House) network moved $51 trillion in twenty-three billion transactions in 2018. It's the backbone powering almost all financial transactions of $25,000 or below in the United States. The Federal Reserve Bank (FRB) and Electronic Payment Network (EPN) operate it, and staying in their regulatory good graces is paramount to the continued operation of any financial institution.

A case study of how new regulations can impact financial institutions

Flashback to 2016 - financial institutions only need to settle accounts and send a return file to the FRB once per day. This gives operators at these institutions quite a bit of time to process the transactions, edit entries, and post the return file. (This is also why it takes so long for debit card transactions to clear your bank account). Automating this is relatively simple.

But now financial institutions are facing the implementation of Same Day ACH, requiring them to post their return files twice per day if they wish to remain competitive. The goal is to reduce the lag time between transactions and account settlement, which has several benefits. Consumers will have more up to date account balance information; merchants receive payment faster, and there will be fewer returned entries.

The negative outcome is the workload for the teams dealing with ACH is about to increase substantially. It will be necessary to do the steps involving processing the return file a second time per day in a much-compressed timeframe. How are smaller organizations going to do double the work without doubling their staff?

Use automation to handle the extra workload

SMA Technologies has an embedded presence in the credit union and banking space, and our clients reached out to us to help meet the new demands without over-burdening their data-processing teams responsible for ACH. Our consultants worked with clients to streamline their existing ACH automation and configure the workflows and scheduling necessary to help them accelerate their internal processes to meet the time constraints the new rules imposed. Other than the manual processing of exceptions, where an account number or name is incorrect, our clients were able to automate almost every process required to stay in compliance.

By and large, our clients did not have to add headcount to meet the increase in workload incurred by the rule changes. This is one of the things OpCon does best; creating automation solutions for clients that enable their team to handle bigger workloads without increasing their work hours.

Move forward and prepare for future regulations

While this is one example of using automation to help clients comply with new regulations, it certainly won’t be the last. The rules will be changed again in the future, and they typically result in more complexity, not less. Organizations shouldn’t delay their efforts to modernize, because in the end that almost always results in unnecessary stress and expensive solutions.

The way forward is to prepare your organization to meet future changes by automating as much as possible now. This lays the foundation to quickly adapt to changes not just in the regulatory environment, but in the business world as well.

If you would like to have a conversation with an automation expert about using automation to help your organization optimize business processes to make it easier to meet regulatory requirements, SMA Technologies would love to help you.

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Webinar: How to reduce the cost of managing IT compliance standards

Webinar description: Every organization needs a process for automating their compliance program. In this webinar we’re going to give an overview of how automation can be used to maintain compliance, and dive deeper into the different components of it. We’re going to cover the following topics:

• Creating the roadmap for automating your compliance program
• Shoring up compliance with audit documentation
• Automating information security processes and access control
• Automating onboarding and offboarding to stay in compliance

Our presenter will be Ben Demaree, Direct of Product Management for SMA Technologies

03/26/2020 11:30-12:00 CST

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About the author:

Ben Demaree is Director of Product Management for SMA Technologies, where he bridges the gap between the clients and the development team to make sure our clients have the best tools possible to meet their automation demands. When he's not at work, Ben spends his free time with his wife and four children and an interesting variety of pets.