Reconciliation and Exception Management

by Axel Pierron,  Anshuman Jaswal, PhD, September 14, 2010
Vendor Reviews
Global, Asia-Pacific, EMEA, Latin America, North America

Abstract

IT spending on reconciliation exception management solutions is expected to reach US$700 million in 2010, of which US$360 million will go to third party software vendors, US$90 million will be spent on specialized providers, between US$200 and $250 million will be captured by external resources, and around US$150 million will be allocated to maintenance and upgrade of existing solutions.

In this report, Reconciliation and Exception Management, Celent examines the growth and evolution of reconciliation and exception management solutions in recent years. The report considers the various issues and challenges that have emerged and the implications for the industry.

Looking at the spending by region and segment, North America and Europe and Tier I and II banks and asset managers dominate spending. Diversified banks in Europe and North America, many forged by mergers, have a higher propensity to seek outside solutions, while Asian banks prefer homegrown systems. North America comprises the largest portion at 46%, while Europe comprises 43% and APAC is 11%. Corresponding 2010 spending levels are estimated to be US$325 million for North America, $300 million for Europe, and $75 million for Asia-Pacific.

“Reconciliation engines are increasingly becoming more capable of handling new types of OTC derivatives, and are reaching out to become workflow management solutions through incremental upgrades to their exception management tools,” says Anshuman Jaswal, Celent Senior Analyst and coauthor of the report.

“Vendor functionality is fairly undifferentiated, but customer preferences are for smart, rule-driven reconciliation engines with a high degree of flexibility and the ability to customize,” says Axel Pierron, Celent Senior Vice President and coauthor of the report. “Exception management is viewed as a core part of any solution.”

Growth in collateralized OTC derivatives transactions has meant that reconciliations have to evolve accordingly, and this report discusses the drivers of and challenges of this development. It also looks at the possible benefits of three-way reconciliations and shared reconciliation services.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned subsidiary of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary

1

Introduction

2

Market Size and Growth

3

 

Market Context

3

 

Global Reconciliations and Exception Management Systems Spending

4

Market Trends and Drivers

9

 

Key Market Trends

9

 

Main Drivers of Market Growth

9

 

Barriers to Market Growth

10

Reconciliation and Collateralization

13

 

Reconciliation

13

 

Collateralization

14

Vendor Views and Positioning

19

 

Reconciliation Technology

19

Conclusion

22

Leveraging Celent’s Expertise

23

 

Support for Financial Institutions

23

 

Support for Vendors

23

Related Celent Research

24

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