Time to get real time?

Real time information (RTI) in liquidity management is fast becoming a must have for banks. "Back in 1999 when we started looking at it, it was very much a nice to have, a differentiator. Now in 2004 it's an essential solution. It's not a question of if, but how," said Paul Nixon, senior product manager, Banking Services, Global Payments and Cash management at HSBC and panelist on the Sibos session entitled "Real time information. Is legacy getting in the way?"

Till Guldimann, vice chairman of SunGard, sums up the "why" of real time information as risk reduction, efficiency, better data mining and better service to clients. In addition, regulators are pushing banks to provide more sophisticated historical and real time data collection. There are also costs and reputational risks for banks that don't have the right asset in the right place at the right time.

But it's the "how" of adopting RTI where many banks find the going slow and many are delaying when it comes to migrating to the available systems. As Guldimann puts it: "If we can get from Fedex real time information about where a package is, why can't we do that in banking?"

According to HSBC's Nixon, legacy systems within banks are a major hurdle to RTI systems. "The legacy driver is about who is prepared to change the way they operate today. There's no value in having the information dropped on you - you have to be prepared to use it. The reality is, if you run your system using coloured pencils and tacks you can have all the info you want but it won't do you any good unless you're prepared to change that model."

He suggests that back office solutions often take second place to sexier customer interface solutions. "The challenge is changing the way we work through the back office."

Frank J. Harris, head of correspondent banking at Mizuho Corporate Bank, agrees that adoption of RTI can be a long and painful process. "There's a lot of potential resistance within organizations because you have to filter through so many stakeholders and get approval," he said. "You get a champion within who says "let's do this" and he goes to see lots of different people and they all have a different understanding of what real time is and their reaction is generally "no" because they're busy with other things."

Providers of RTI systems could be doing more to speed up the adoption among potential clients by considering RTI within the context of the user's existing systems, argued Guldimann. Providers must deliver RTI in a way that makes sense for the client because the challenge is not about having the information but using it in a meaningful way.

"We have to somehow organize the bits of information we give to clients in the process that the client uses it. We have to be very careful about what sort of information we provide and in what context," he said.

Richard Pattinson, senior director of settlement strategy and systemic risk at Barclays and moderator for the session, agreed. "RTI is not the silver bullet in and of itself, it needs to be integrated in a number of applications. What we're talking about is the lifetime tracking of a payment. That can happen with real time information."

Legacy need not be an insurmountable barrier to adopting real time systems, said Mizuho's Harris. "I see the answer in three things: engage, engage, engage," he said. "Engage your Nostro providers - do they have real time? If not should you talk to others that do? Engage real time partners to get advice and value from them. Engage vendors and system providers - can they provide a system for you bearing in mind that we all have legacy systems that are not going to be swept away. Can they provide systems around that?"

Phased transition to RTI systems is one way to overcome the existing inertia. "I get the argument that if everyone is not on real time it doesn't really work. That is a hard one because there is so much investment in legacy systems and it's too costly to change everything overnight, over a year or even over five or 10 years time," said Guldimann. "So you look at what you can change."

Identifying areas where legacy could be sidestepped can also provide solutions. "eBay is a true innovation [in an area] where we don't have any legacy systems. We should look at other areas of the economy where someone has started something in a green field and not just look at areas where we can make things a little bit better and a little bit faster within our legacy systems," he said.