Banks with processing capacity headaches are turning to Aleri, a New York-based software company, for fast relief. Aleri has helped many banks to overcome the limitations of their relational database systems.
An early client was Allied Irish Banks (AIB), which hit the data processing wall about three years ago.
"We were taking more functionality onto our transaction processing systems and we were running into a bottleneck in terms of reporting," said Padraic Hamrock, head of technology for the 88.8 billion euro Dublin-based Allied Irish Banks. "We just didn't have the capacity to expand the systems any further."
The solution was Aleri's high-speed transaction processing engine, which employs a technology called "vector processing" to speed up repetitive operations involving large matrices of data. The technique basically sets up an assembly line for performing rapid computations, bypassing the row-by-row processing limitations of relational databases.
For example,in the case of a financial institution needing to calculate accrued interest on account balances, a traditional relational database program would fetch a current balance from the database, one row at a time, then multiply by a given interest rate and update the database with the results.
Under the vector processing model, the program would fetch all of the affected account balances in one fell swoop, and then feed them as quickly as possible to an optimized calculation engine.
Not only does this approach cut down on idle time at the calculation engine, but it allows for parallel processing, i.e., adding new calculation engines using separate processors.
It's the computing equivalent of placing a cartload of groceries on a supermarket conveyor belt checkout with a cashier in the middle and two industrious baggers at the other end. That's an obvious improvement over picking each head of cabbage or can of soup from the aisles one at a time, bringing it through checkout, and then repeating the process for the entire grocery list.
At Allied Irish Banks, the Aleri system takes data from a Sybase database on a nightly basis, runs its proprietary algorithms, and then stores the results back into the database.
"Aleri allows us to increase the volumes to deliver additional functionality through reports, and to have our systems available for the online day," said Allied Irish Banks' Hamrock. "That enabled us to move forward as we wanted, by taking on additional locations and products."
In the wake of the $691 million fraud loss at Allied Irish Banks subsidiary Allfirst Financial, Allied Irish's deployment of the Aleri solution will also support the addition of more stringent operational risk controls. "It allows us to consolidate all of our locations," said Hamrock.
That means the home office has the ability to take a closer look at how each division uses the company's balance sheet and for what purposes, under new layers of back-office controls.
But since Allied Irish Banks uses the Aleri technology in a batch mode rather than a real-time mode, it won't be able to take full advantage of the very latest application of Aleri technology: monitoring liquidity under a continuous linked settlement (CLS) environment.
In part to bolster its continuous linked settlement offerings, Aleri purchased mpct Solutions in January, and has been working with financial institutions such as ABN AMRO, Barclays, Banco Intesa and Standard Chartered to get them ready for an estimated third-quarter launch of CLS Bank, a New York-based bank-owned "financial utility."
CLS Bank will reduce the settlement risk of high-value transactions to its member banks. But that creates a new liquidity challenge. Settlement under continuous linked settlement is akin to going to a restaurant and paying by the bite; banks must pay in advance, using a separate currency for each food group.
The new dynamic makes it all the more important for banks to keep track of their available funds throughout the day. As a result, banks are "looking to monitor liquidity in real time," said Aleri CEO Alan Hambrook. "If you're making timed payments throughout the day, the next thing is, 'Do I have the cash?'"
For a global bank, that requires immense processing capacity.
"A lot of the banks are looking at their liquidity position, by currency, at five-minute intervals," said Hambrook. "The faster you can monitor that, the better the utilization of capital."
Indeed, Hambrook expects liquidity to become a commodity in its own right.
"Is the bank carrying excessive liquidity?" Hambrook rhetorically asked. "Maybe it can sell some."