The Days of Manual Credit Card Reconciliation Processes Are Numbered

“An arduous and labor-intensive affair.”

That is how Sam Seaton, CEO of open data platform Moneyhub, describes the financial month-end close process of reconciling credit card payments — which, due to the uneven distribution of data, often runs the risk of suffering from bottlenecks.

According to Seaton, companies managing expense cards for employees would typically receive a monthly statement from the bank and then have to frantically and manually attach receipts and categorize the spend within a short window of time. “And that is, of course, assuming you have all the receipts and that employees are on hand to provide whatever information is required,” she told PYMNTS in an interview.

Related news: Moneyhub, Expense Once Team on Credit Card Payment Reconciliation

To automate the manual, time-consuming task, the U.K.-based financial management platform recently announced a partnership with expense management software provider Expense Once, which will use Moneyhub’s open banking technology to create a real-time solution that streamlines the process for company cardholders by generating expense reports on their behalf.

Using machine learning and computer vision, additional features such as digital receipts and categorization will be automatically matched to each transaction on behalf of the claimant, “creating a quick, easy and accurate process to reconcile claims and submit the expense reports,” Seaton explained.

Founded in 2013, the financial technology company has grown into a leading open finance and data intelligence platform, offering businesses in the U.K. and Europe application programming interface (API) and white-label solutions to help enhance the customer experience.

In the U.K., over 200 financial services providers via 580-plus connections get access to consent-driven financial data through Moneyhub, with an additional 3,500 connections receiving the same service across Europe.

Taking the Digital Leap

Saving time and cost is the assumed goal of every business; as a result, digitizing manual processes would be a no-brainer for firms looking to boost efficiency. But that is not the case, Seaton said, given that some companies are still stuck using their old manual processes and are yet to take the digital leap.

She attributed their reluctance partly to a lack of education and awareness around open banking’s capabilities, despite some regarding the banking practice as the strongest driver for financial change and innovation in years.

Another challenge Seaton mentioned is the time and effort required to change existing operation methods, which even though they are often less efficient and more costly, they can be deeply entrenched in the system and therefore extremely difficult to change. “We also mustn’t forget that people worry they or their entire departments might lose their jobs, [and] on top of that, people don’t like change,” she noted.

For firms that are open to the change, however, she said “it can be slow-going” if there are no strong leaders who see the need for business transformation in order to survive in an era where consumer expectation for digital interactions is at an all-time high.

But it can still be done, and Seaton suggested that businesses take the time to build their confidence by starting small, then testing and refining the process before finally scaling the solution to a fully automated digital experience.

“The beauty of open banking, and technology more broadly, is that the cost to test and learn is less than most average consulting companies charge for a few weeks of work. Redeploying some of that consulting budget is quite effective in our experience,” Seaton remarked.

She further advised businesses to select an open banking supplier that has the best possible categorization engine of both personal and business transactions, as well as wide coverage of banks — and not just the obvious ones. That approach, she said, will ensure that manual administration is eliminated from the digital process as much as possible, enabling widespread use of the digital solution.

VRPs Push Open Banking Into The Mainstream

In July, the regulated FinTech announced its largest investment round to date, a total of $18 million, which the firm has earmarked to fuel its expansion into new markets.

But Seaton said the most exciting development of 2022 is the mandatory implementation of sweeping via variable recurring payments (VRPs) that will allow consumers in the U.K. and Europe an unprecedented level of control over their finances. July 2022 is the date set for the introduction of VRPs 1.0.

Instead of using direct debit or credit and debit cards, Seaton said customers can also connect authorized payment initiation service providers (PISPs) like Moneyhub to their bank to “sweep” money between accounts, making VRPs more cost-effective when helping consumers avoid overdraft fees, for example. They also serve as a highly secure replacement for card payments, direct debits and standing orders.

“Ultimately, VRPs will allow the creation of new products that were previously inconceivable,” noted Seaton. “They will pave the way for payment innovation and the creation of new financial services designed with a laser focus on customers’ needs.”