Wirecard – Looking ahead: Reconciliation & evaluation of merchant settlement accounts with acquirers

BY ELDO DEVOLE

The Federal Ministry of Finance has now published a 16-point agenda for supporting the BaFin. The consequences for the financial market have become very concrete and that just a few weeks after the Wirecard incident.

Without going into detail about the significance of each individual point, this means the following for the financial industry: In the future, BaFin will now also examine special cases of payment transactions in more detail, and will demand an exact and correct breakdown of the books and the entry of their contents.

All finance and payment institutions will now have to devote themselves to the task of increasing the level of clearness in the fields of reconciliation and entries. In addition, the auditors will now (according to the plan of the Ministry of Finance) also have to take responsibility for the release according to the civil law, which in the end will significantly increase the focus on accuracy.

From our point of view, there are three steps to address the issue in clear terms:

  • Process Design

It is usually 20% of the cases that require 80% of the work. In payment transactions it isn´t any different. Often, a variety of exotic cases are the reason why in the international business sector, the efforts in both issuing and acquiring side are becoming increasingly complex. Yet this problem, which almost every acquirer or issuer still has, should finally be tackled. Manual rework must be stopped if possible. Therefore, it would be important to look for automations in the process design. This path may be long, but a solution can be found for even the rarest and most exotic cases.

  • Control and Documentation

Guidelines as well as the automatized and unavoidable documentation of all the steps and activities become indispensable. Manually triggered steps should only be permitted if mandatory fields such as “reason, handling, result” have been filled in. This makes the documentation a necessary step and retroactive verification easier, motives more transparent and fraud more difficult.

  • Systems and Tools

There are many solutions on the market that help with reconciliation and accounting. Many acquirers and issuers have developed their own veritable solutions that already cover a lot of issues. In our opinion, it is now essential to go the last mile and cover all cases that usually cause headaches. This can be done either in cooperation with the Recon Software Providers or by appropriate development efforts. It is important to develop a basic understanding of still existing problems. How many gaps exist in the books? Where does it come from? It is important to keep in mind that every untraceable Euro, could become a million tomorrow. Therefore, the priority is to analyse the incidents in detail and implement the right tools to understand them and close the gaps.

Silver Lining:

Even if this article was written in response to the expected pressure from BaFin, the following point should not be ignored: The right procedures, data evaluation and data handling are worth their weight in gold. They don´t only help to optimize processes, reduce costs, and ease the CFO’s headaches, but can also be a steppingstone for innovation and product optimization.

We can only improve something if we know exactly what´s not working.

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