Upgrading technology is table stakes for changing world

In the face of a slow economic recovery, increasing regulatory burden, and surging industry consolidation, what critical areas should financial institutions focus on, particularly in the technology area?

Five things, said Raju Shivdasani, president of Harland Financial Solutions: Manage risk effectively; increase efficiency; stay current with regulations; build and nurture customer relationships; and deploy smart sourcing. He spoke at HFS’ annual conference Aug. 5, in Washington, D.C., attended by several hundred bank and credit union clients, as well as employees and other vendors.

Here are excerpts of Shivdasani’s general session address:

“Your next move, clearly, is managing risk effectively. Risk takes on shades of marketing risk, operational risk, and, of course, more importantly with Dodd/Frank and everything else, credit risk.

“What caused the crisis of 2008? It was all about bad lending. It’s important, while loan demand is still off, to look at your lending processes. A lot of you still have very fragmented, very cumbersome and very costly loan systems…Look at loan origination, the whole underwriting process, see how you can integrate credit risk, rate risk, concentration risk…How can you integrate risk in terms of automated tools into that whole end-to-end origination and compliance process? It’s important to do that.

“If you look beyond loans and lending, … the days of running 20 or 30 disparate systems are over. You’ve got to look at your back-office processing systems. More importantly, make sure they are tightly integrated into your payment systems. Even more importantly, make sure they are implemented with your multichannel delivery systems which, by the way, are all going real time.

“Make sure the plumbing, the framework, the architecture, the technology, allows you to take applications, data, and process and [then] deliver efficiency, deliver effectiveness, and better experience. This is table stakes

“You are spending umpteen hours now keeping current with regulations. You’ve taken ordinary development resources that would be putting enhancements out and [instead] directing them to keep current with regulations.

“In this era of Durbin, where you are squeezed for noninterest income, we see a lot of pressure on income. It’s really important to go back to those fundamentals, of knowing your customer, renewing your customer, deepening those relationships, and acquiring new ones.

‘It’s important for you to start deploying the full spectrum of channels beyond the branch. Internet banking. Voice banking. Mobile banking. It’s also important to go beyond just inquiries, alerts, and bill pay on the internet and mobile channels—to account origination. Let your customers, let your small businesses…originate their own deposit accounts; originate their own loans; onboard accounts at your institutions by themselves, without any bank interference. It’s important to allow them to move money, account-to-account transfers, person-to-person payments, and do it all without any human intervention.

“It’s important to deploy things like remote capture. You shouldn’t have to come to the branch to deposit a check. Mobile capture. All of that is happening now. All of that enhances the experience of that customer.

“Last but not least, deploy smart sourcing. Single source as best as you can to a single vendor, whoever that might be. More important, outsource those functions that are best handled by others.

“Many of you have done this for years, with hosted processing, account processing, payment systems, internet banking systems. Now is the time even to look at certain business process outsourcing functions, like marketing and onboarding and call center work.”