Reconciliation Software in Banking Market

Market Overview

Global reconciliation software in banking market by on cloud deployment is expected to grow at CAGR 13.12% during the forecast period 2019–2026.

In an accounting system, reconciliation is the process of verification that ensure two sets of records are in agreement. Banking is a challenging industry with respect to reconciliation and close management practices. The high amount of transaction volumes, process complexity, accretion of data sources, dynamic regulatory requirements, and other factors fuse to create some of the most intricate and cumbersome reconciliation processes present today.

Market Dynamics

Ten years after the global financial crisis in 2008 the banking industry has revamped its health, and the mood of bankers is upbeat. With 85% of banks citing the implementation of digital technology in their banking operations, it has become a business priority in 2018. Investment in technology to drive efficiency, manage evolving risks and benefit from growth opportunities will foster the growth of reconciliation software during the forecast period.

The cost of compliance has risen dramatically since the crisis, and it has reached the peak of regulatory-driven investments in systems.

Reconciliation software is one of the tools that has become imperative for the banking industry to run the internal operations smoothly and efficiently. There has been the substantial adoption of its use among banks from developed to emerging economies to build a robust banking infrastructure.

Segmental Analysis

Global reconciliation software in banking market has been segmented majorly on the basis of deployment type and functionality.

Based on deployment type, market is segmented into on-premise and on cloud. Increased concern among the banking enterprises regarding the data security features of reconciliation software is expected to propel the market growth during the forecast period, 2018–2025. For instance, deployment of reconciliation software on the cloud would be vulnerable to security control because data and software reside in the hand of the vendor and not the customer. However, the risk of information leaks could result in manipulation of data. Large banks are adopting cloud-based infrastructure mainly to divest their expenditure in server hardware. In terms of cost, lower upfront cost and storage cost has helped the growth of the cloud services to grow at a rapid pace. Extra storage can be added with no hardware to purchase.

While depending upon the functionality, market is segregated into matching engine, exception management, reporting and analytics, financial control, automation, and other. Transaction matching can be defined as the process of comparing and allocating the transactions between two data sets for the given period of time. It also includes an examination of the exceptions, identifying the errors and open posts to be reported. Transaction matching can be processed on the daily, weekly, or monthly basis. Additionally, it also matches all the transactions on bank statement to that of registered transactions on the bank account of the system. In the banking sector, several challenges in transaction matching can’t be overlooked. Exception matching process is a time-consuming and tedious work without the proper tools. The aim of exception management as a reconciliation tool is to provide an integrated view of all exceptions by class, giving the business user the ability to manage the risk better. It also provides the ability to penetrate into all types and down to individual transactions to examine and settle the exceptions.

Regional Analysis

Geographically, the global Reconciliation Software in Banking market is segmented into North America, Europe, Asia Pacific, and Latin America, Middle East & Africa (LAMEA).

North America is holds the largest share of the global reconciliation software market. This is attributed to technological advancement in banking operations, increasing number of transactions as result of digital payment services and growth of virtual cryptocurrency aided by blockchain technology.

According to the European Banking Federation (EBF), around 6500 banks and 2 lakh branches were present in the European Union in 2017. Per day around 305 million cashless payments are transacted in the union. EBF has also reported that European banks have invested €18 billion in software. This magnanimity of the operations in the banking industry and favorable growth rate in the future validates the affirmative growth for reconciliation software market.

In Asia Pacific, driven by thriving economic prospects, the banking sector in the developing markets remained stable even during the worst phase of the 2008 crisis. Even in the coming years, banks in the emerging markets are expected to drive the growth of the global banking industry. According to the World Bank’s report, 51.4 crore bank accounts opened from 2014-2017 globally, 55% of them were from India. Deep integration of innovations and information technology into banking business by Chinese private banks like Shenzhen QianhaiWeBank would enable high quality, more efficient financial services available to a large number of individuals and MSEs.

The financial crisis of 2008 depicted differences that exist between the performance of the banking sectors of emerging and developed markets. The banking industry in the emerging market of Latin America remained fairly resilient during the crisis and registered a growth rate of around 40.1%. This performance highlights the rising importance of banks from emerging economies on the post-crisis financial landscape. Given the huge growth potential that the emerging markets offers, this trend can be anticipated to grow even stronger in the future.

Reconciliation Software in Banking Market Segmentation

By Deployment Type

• On-premise
• On Cloud

By Functionality

• Matching Engine
• Exception Management
• Reporting and Analytics
• Financial Control
• Automation
• Other

By Region

• North America
• Europe
• Asia Pacific
• LAMEA