A mortgage servicer's decision to use batch file or real time integration for their systems is not cut and dry with one method having definitive benefits over the other.
Each has its advantages and disadvantages. There are times when it makes sense for a company to use one over another or both.
Taking into account the needs and preferences of a business as well as the goals for the end user sheds light onto which system better fits a company’s internal operations. Whether the systems are both internal to the company or if one of the systems is managed and housed at an outside vendor also play into the decision.
Batch file integration is named as such because data is gathered into a “batch” and is sent over to a system all at once.
This type of processing has been used in organizations since the 1950s, so it provides a certain comfort level and is generally well understood. Using batch files can improve efficiency by gathering high volumes of data for processing at one time instead of doing so for each individual file or transaction. Batch processing is also great in an unattended environment where a large batch of data can be loaded from one system into the other and afterwards an exception report can be produced showing any failures.
The disadvantages of batch file integration are based on an individual company’s needs.
While connecting systems once a day suits how some companies operate, other organizations would find the time delay before data is returned to be ineffective. Banks with ATMs, for example, require transactions to be instantaneously processed to provide updates to individual accounts in real time. Integrating systems with batch files means that records are not always up to date.
Real time integration connects systems on-demand, usually driven by some user action, such as data input. The name “real time integration” is actually something of a misnomer; these transactions are not technically performed in real time, however it is close enough for most businesses.
There is a continual integration of transactions of data run between the systems in a short period of time. Any errors are caught immediately. This appeals to organizations whose procedures depend on the ability to act immediately. Processing data in real time can increase customer satisfaction by improving internal processes like the time it takes to update an account or outstanding balance.
Integrating systems in real time does not fit all companies, of course. The system interfaces are often complex, reflecting continually changing technology. As data is processed immediately, the transactions often must occur thousands of times a day from start to finish.
Currently, about 20% of companies integrate their systems, whether they are internal or with an outside vendor, using real-time transactions, a number expected to continue to rise as batch file processing is phased out over time.
In fact, all organizations today have some real time processing files to conduct operations that cannot be delayed.
Batch processing will continue to decline in popularity, and it is important that servicers conduct annual technology audits to make sure they are fully aware of their changing needs and the best technology mix to meet them.
Steve Wiser is CEO of Cleveland-based Specialized Business Software, a provider of custom software solutions for insurance, mortgage and financial services companies.