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Strategic Insights

The Weakest Link: Plugging the Data Management Gap in Cross-Border Transactions

This report looks at how legacy systems and operational processes can be optimised to address the plethora of data management issues that come with the ongoing explosion in global transaction volumes.
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As the number of global payments (and thus cross-border transactions) continues to surge, so too has global financial messaging traffic. Banks, as the primary facilitators of cross- border transactions, are a critical enabler to this space. 

Notwithstanding strong headline growth numbers in cross-border transactions, there are three fundamental issues associated with transaction data management that the financial services industry continues to grapple with, including: (1) market fragmentation due to the lack of an integrated cross-border payment system; (2) legacy IT systems with non- standardised processes and data formats; and (3) increasingly stringent compliance requirements with different messaging protocols / standards across jurisdictions. 

These issues lead to a myriad of problems, with a critical implication being a lack of data transparency and visibility. As a result, when there are delays and / or failures in transactions, it is extremely difficult for banks to pinpoint the location of the issue (much less the issue itself), hindering the resolution process. In fact, we estimate that over 1.8 million cross-border transactions suffer from delays, issues, or failures on a daily basis. That translates to the world’s banks spending over 19,000 hours daily on addressing these transaction issues, or 4.8 million hours per year. 

In Asia, these challenges are exacerbated by the fragmented nature of the market. While financial institutions in Europe and America are supervised under more standardised regulations and have access to pan-regional transaction systems, Asian banks need to work with multiple regulators and localised infrastructure. This creates additional complexities when it comes to implementing processes and developing systems that are aligned with international standards. 

These challenges all point towards an urgent need to address the underlying issues in transaction data management: To this end, a well-established transaction data management infrastructure, coupled with targeted process optimisation, is key to enhancing operational efficiency within the cross-border transaction space. We see the opportunity for the industry to reduce transaction issue rates by 72% and issue resolution times by 32%, translating to a total time saving of 4 million hours per year (or an 81% reduction in time wastage) in addressing cross-border transaction issues. 

As global transactions continue to grow, both in terms of volume and complexity, data needs will inevitably increase in tandem. Now, there is no time to waste. For financial institutions that are struggling to keep up with data management requirements, it is time to address the weakest link. 

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