The business case for updating bank systems is clear. Bank executives who are consistently investing in innovative technologies and systems not only beat their competitors, but also experience strong growth and are better equipped to support their customers.
Talent is the foremost factor when making the case for investment. While the original architects of bank systems and technologies retire, often taking their institutional knowledge with them, the next-generation workforce is increasingly more adept at the modern interfaces they use in their daily lives. The consumerization of B2B technology will lead to more intuitive systems and less onerous onboarding processes for employees, but the transition period will prove challenging.
Beyond talent there is an inherent advantage in the computing power that new technology available to banks brings to bear. The newest banking systems are faster, more efficient, and ultimately more effective than the software and hardware of the past. Innovations in big data alone can have a major impact on how bankers handle information management, including dashboard reporting, customer relationship management and monitoring their portfolios.
Three ways bankers react
Taking all of the changes impacting bankers into consideration, there are three mindsets of bank executives that dominate the sector’s approach to adopting new technology and systems in 2015. These mindsets frequently align with a bank’s ability to grow, win over new clients, and recruit the best tech talent in the industry. The more strategically progressive the mindset, the better positioned the bank is for success.
An extreme avoidance of risk defines the cautionary. The cautionary is slow to adapt to changes in business practices and prefers to watch from the starting line, as peers and competitors run the race.
Bankers who embody this mindset maintain a low short-term risk profile and incur measurably fewer up-front costs.
Without a long-term outlook, however, they ultimately end up spending more money and missing out on valuable opportunities to improve customer service, enhance the efficiency of workflows, and take advantage of real-time access to data and analytics for their banks’ portfolio.
Where the cautionary is risk averse, the reactionary views risk much more neutrally. They make changes to their business strategy as they go along and focus on perceived needs of the bank as they arise. Addressing problems in real time spreads risk and cost over a longer horizon.
Bankers who are reactionaries tend to view the expense of technology troubleshooting as an ad hoc operational cost, as opposed to a long-term investment.
The troubleshooting approach of the reactionary can lead to increased unnecessary institutional complexity, as legacy systems and processes are interwoven to solve problems on an ad hoc basis. This short-term approach can lead to much higher costs and much less strategic execution on the IS/IT front of the organization.
A strategic risk taker, the visionary banker’s decision making process is dictated by a long-term perspective on the goals of the organization, including maintaining customer relationships and keeping bank processes and procedures up-to-date.
Bankers who fit this profile are secure leaders, seldom influenced by personal risk. They bring a more objective approach to the decision-making process and recognize the need to take risks for the good of the business.
Visionary banker executives take on more upfront costs compared to non-visionary peers, but they do so with a long-term strategy that increases the bank’s efficiency, improves technical performance, and has significant potential to reduce operational expenses over time.
Often willing to be an early adopter, the visionary executive is the first to migrate his bank’s systems to cutting edge technology.
Weighing the types
While there are benefits and challenges associated with all three mindsets, calculated risk and a progressive approach to technology is what separates the industry’s leaders from the followers.
Whether your bank is on the sixth version of its proprietary smartphone wealth management application or your website is years out of date, the most important takeaway from this exercise is that it’s never too late to pursue strategic innovation.
In spite of accelerating technological change, many bankers still find themselves faced with a patchwork of legacy systems and processes, as a result of fits and starts of innovation in an ever changing marketplace. Determining a long-term plan for technology investment and maintenance is essential for banks to move beyond the patchwork of solutions to a seamless, integrated approach.
About the author
Al Chiaradonna is senior vice-president of SEI’s North America Private Banking Unit and responsible for the overall launch and delivery of the SEI Wealth Platform.