It has never been more important for community banks to manage effectively a wide range of systems and technology to meet customer needs. Keeping up with technology means staying competitive and increasing profits. Historically, only “big” banks could afford state-of-the-art technologies. Decreasing costs and hungry vendors now make it possible for community banks to implement them. So what technologies are making the biggest impact in this sector? Here are the most useful solutions.
#1 Integrated systems
We find this to be a hotly debated topic in most bank strategic and technology planning sessions. In many cases, each of the business-line executives or users within the bank want the absolute latest and greatest new technology. Many times, this leading edge technology does not come from the bank’s core system provider, but from a separate company. The bank then has the burden to manage the interface between the ancillary system and the core system. Sometimes there is no interface, or the interface only passes some of the required data between the two systems. In most cases, they will use manual processes, workarounds, and duplication of work, all of which cost the bank money and are prone to errors and inconsistencies. The core system vendors spend millions each year working on integrating systems, yet many banks think they can do a better job themselves.
The problem is the inefficiencies of these processes get buried in the organization, and the CEO generally can’t see the total cost of non-integrated systems. This may be one of the greatest technology challenges banks face today, and the discussion and planning required takes more than can be conveyed in one article.
As long as we’re on the topic of core systems, we are seeing more community banks review their core processing and other processing agreements for more favorable pricing and better contract terms and conditions. There are still a surprising number of banks that are converting to vendors with more robust and integrated solutions. The more tightly integrated systems also become important as the banks struggle with managing risk and providing the executive reporting needed in today’s regulatory and changing business environment.
#2 Document imaging
While it has been around for years, the importance of imaging has increased significantly. Banks today are challenged with dramatically improving efficiency, while complying with a host of new regulatory guidelines. Quality loan demand is down and likely to remain low for quite some time.
Document imaging should be considered as important to a bank as core processing. It’s a strategically important technology, and the more integrated it can be into the core system, the better. However, it’s the most poorly implemented technology we see in banks today. For a bank to truly streamline business processes, it must effectively use document imaging.
We have seen banks begin organization-wide operational improvement projects (workflow) without plans to implement imaging until after the workflow project is completed. That is counterproductive. In today’s world, imaging allows a bank to open a new account in a branch and the only paper document created is the disclosures that go out the door with the customer. Everything else, including application completion and signatures, is electronic—no scanning, indexing, verification of indexes or scan quality, physical filing or shredding.
Well-planned imaging can create a truly paperless, new-account process. It gives bankers access to all customer data in one place, at one time. And imaging provides benefits to the environment by keeping banks green.
#3 Remote deposit capture (RDC)
This is not an “if” technology, it is a “when” technology, and when should be sooner than later. RDC is inexpensive and easy, and a revenue enhancer. The customer does the work and pays the bank. Why? Because it is more convenient, safer, and more secure. Numerous banks today allow customers to deposit checks by snapping a photo with their cell phone and uploading it. Customers don’t need to go into a bank or even leave Starbucks. Offering RDC can help banks draw in new customers and reduce processing costs.
Additionally, this technology allows banks to accept deposits from customers outside their physical market area. For example, when a high school graduate leaves home and attends a university, she is no longer forced to switch banks in order to manage her finances. Does your strategic plan call for courting college students? They are the future.
What about the ability to serve a broader footprint of lucrative small-business accounts? RDC allows businesses to capture and transmit customer payments to their bank as deposits whenever they want, which saves time and effort. It also allows banks to take deposits and service businesses and their branches from a central set of accounts, regardless of location.
#4 Payment technologies
Banks continue to see erosion in payment and other transaction services to non-banks. With emerging payment solutions using mobile devices to transfer money or make point-of-sale purchases, banks must adapt their systems to work in compliance with new, outside vendors. Banks must be aware of these solutions so they can embrace systems that offer market advantages.
New payment technologies also provide an opportunity for community banks to provide a wider range of services for making payments and moving money online. We’re seeing an acceleration of strategic initiatives in this area. Some of the emerging technologies: sending and receiving money via text or email through services such as Popmoney; image scanning credit cards at the point-of-sale, like Jumio’s Netswipe; paying bills and loading prepaid credit cards online through MoneyGram; and PayPal’s new features such as PayPal mobile. When was the last time you looked at the applications on your son’s or grandson’s phone? How are they paying bills?
#5 Proliferation of new mobile devices
Cell phones became smart phones, and now tablets are entering the scene. The use of tablets and other “smart” devices by consumers and businesses is changing how banking is done. Banks are adopting these technologies internally, as they allow employees to perform business processes more quickly and easily.
Employees can use the devices in direct interactions with customers. For example, tablets can streamline the process of opening a new customer account. Traditionally, a new account includes brochures or graphs to explain fees and terms; however, with the same information assembled on a tablet, the banker can work side by side with the customer to compare features, rates, and other options. Tablets are used essentially in place of paper; not only as a way to sell, but also incorporating compliance requirements such as signature capture from clients. Instead of having clients fill out pages of paperwork, tablets become the most efficient means of capturing, processing, storing, and retrieving data.
Have you thought about what “apps” the bank should provide for customers and prospects? Do you know how banking with mobile apps is going to change everything from traditional IT to employee training and customer service? New consumer technologies bring cultural shifts to the way people bank and skills gaps to both customers and employees. Among the changes ahead: security and risk management practices; how banks audit IT security; advice banks offer customers on security; how banks certify information systems; and disaster recovery planning.
#6 Social media
While most banks send alerts through email or text messaging to consumer and business clients, they need to leverage other internet communication channels. Twitter and Facebook are among those now used to announce new products, services, or events, and receive personal feedback. A December 2011 study by the CMO Council showed that 47% of bank marketers are using social media to deliver branded bank content to their key customers, prospects, and partners. This ranks as the second-leading marketing channel, only behind websites.
#7 Analytics and dashboards
The increased use of technologies and the internet have made investments in analytics and dashboards imperative. All banks need to keep a close eye on retention, acquisition, response rates, and loyalty to ensure they are running their business effectively.
Today’s digitally driven dashboards are up to the task. When dashboards came on the scene 20 years ago, they were cumbersome and expensive to manage, and interfacing the divergent systems in the bank was a challenge. By the time the data reached management, it was only minimally useful in providing rapid feedback. Often, banks made decisions the same way, rendering pricey dashboards more for show.
Today, with so many people and systems connected through the internet and networks, it is possible to gather data in real time, run it through meaningful analysis, and give bankers an opportunity to make day-to-day decisions that impact the business. Measuring marketing’s effectiveness through varying channels is doable with today’s analytic systems.
As technology use increases, more security is necessary. Bank losses from cybercrime are predicted to grow steadily. That’s why banks must manage and continually review security, and have strong partners to help handle security across channels and devices.
While financial institutions are usually very well protected with security systems, attacking them through their customers is much simpler for criminals. People are less likely to perform security precautions on mobile devices than computers. Increasing customer security must be number one in bankers’ minds. If customers cannot trust banks to protect them, they will leave.
In addition, banks need to enforce security measures for personal technologies in the workplace. While the use of technologies by employees may increase customer satisfaction via increased response time and availability, banks must identify the data employees are accessing and how they are accessing it.
#9 Streamline delivery channels
Banks offer many delivery channels for customers to complete the same task, without channel integration. They must streamline each channel—branch systems (teller, new accounts, loans), ATM, plastic, internet banking, mobile—into one, cohesive process. For example, if a customer starts a loan application online, he should be able to finish it in a branch without starting over. Most often, that is not the case.
As stated in #1, use integrated systems to increase the ease and efficiency of streamlining delivery processes. For community banks, building integrated channel architecture is costly and hard to maintain. Although major core providers offer solutions, continued bank pressure is needed to improve them. In some areas, streamlining can be done without extensive integration, but banks have to know where to draw the line.
#10 Have a tech strategy
Many community banks make tactical, reactionary tech decisions as a result of vendor interests, an urgent need (equipment breakdown), or because existing technology has become obsolete. In these cases, executive management may view technology as simply another expense. With a formal planning process, however, banks begin to think about and manage technology strategically. The link between proper selection, implementation, and utilization of technology, and the bank’s ability to accomplish its strategic business objectives and profitability goals becomes crystal clear.
It is imperative that community banks assess and acquire emerging technologies. In 2012, some banks will thrive, some will just survive, and some will be gone. Are you using technology strategically in your institution?
By Randy Roth is president and CEO of Vitex, Inc., www.vitex.com, a national bank management and technology-consulting firm based in Mooresville, N.C. [email protected]