Top 10 Community Bank IT Initiatives

What they lack in deep pockets, small banks often make up for in agility and a willingness to try new technologies. Bank Technology News presents the top community bank IT projects of 2012.

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Palmetto Bank Palmetto Bank HQ: Greenville, S.C.

Asset size: $1 billion

Project: Updating all customer-facing technology, including voice response, deposit capture and wire transfer technology.

Why we chose it: It's an impressive array of upgrades conducted by a relatively small bank in a short period of time.

Mark Terry faced a daunting duty last spring.

As the newly minted chief information officer of The Palmetto Bank, he was charged with updating the nearly decade-old technology the $1 billion asset bank was using to serve its customers.

There were imaging systems. A new email system. An internet banking portal. And new ATMs, to name a few of the new products installed.

"The main thing I did for a few months was meet with all of our senior leadership," Terry says of the earliest planning stages that launched the Greenville, S.C. bank into the costly nine-month project.

At the start there was an overhaul of the bank's voice response software just last May. The new technology gives customers their account balances and transaction histories and lets them complete money transfers. Four months later, there was the launch of the bank's updated online banking system, which gives customers the ability to see the impact of transactions on their online bank account immediately.

The enhancements included new deposit capture and wire transfer services for corporate customers.

After that, Palmetto's email enrollment system for e-statements was replaced by a program that lets customers automatically enroll once they sign up for internet banking.

And finally there was a new mobile banking portal and app and three new Diebold automated teller machines.

In order to pay for the changes, the bank consolidated two branches and sold two others. Terry says it took a lot of executive "buy-in" to make all the changes happen.

"We are a community sized bank; we don't have a huge amount of staff or a huge budget to go out and do these things," he says. "If you think about the compliance, the marketing, the client support, all of those people had to be on the same page."

Still, one of the biggest obstacles to finishing his initial task was lining up his priorities.

"Everything that we did impacted" something else, he says.

The online banking platform was of course connected to the mobile system; the mobile system then had to work with the email enrollment software; and so on. Terry hired a project manager to help and created procedures for all those steps along the way.

"This year we are looking at several automation projects around document imaging and document tracking [upgrades]," he says. "We're looking at personal finance systems, fraud monitoring systems for mobile banking and adding person to person payments."

- Sean Sposito
The First National Bank of Allendale & Mount Carmel The First National Bank of Allendale & Mount Carmel HQ: Allendale, Ill.

Asset size: $170 million

Project: The launch of a responsive design website and its first mobile app.

Why we chose it: The early adoption of responsive design technology and techniques puts the bank a step ahead of many. Its website, which uses Adobe Flash graphics, now works well on iOS devices.

When the president of The First National Bank found he could not access his bank's website on his Apple device, something had to give. The bank, with two branches in rural Illinois, decided to upgrade its website, which at the time relied on Adobe Flash graphics.

"It was our president (Robert Coleman) who totally led the effort," says Kristin Schrader, assistant CFO. "He's a big iPad user. ...When our website didn't load on his device, he prompted us to start talks about what to do."

Satisfied with the website's design but hankering for it to properly work across all devices, The First National Bank turned to its existing website developer and host provider, Banno, less than a year ago to help facilitate an update. This January, the new site went live.

Though the look and feel of the website is similar to the previous design, customers' digital banking experiences are expected to improve.

That is because Banno included a responsive design format that allows for automatic content adjustment for desktop, smartphone and tablet users. The idea behind responsive design, which is relatively new to the financial services industry, is to reduce the navigation required of the banking customer.

In the previous iteration, Banno had created a full online banking site and a simplified mobile site for the bank. With the upgrade, the bank now boasts one full version of the site that uses media queries to restyle content to suit the screen size and capabilities of device the viewer is using.

In conjunction with revamping its website, The First National Bank pushed out its first mobile app. At launch, the app, which uses Banno's software, offers basic features like transaction viewing, as well as something that many banks' mobile apps do not yet have: the ability to aggregate other financial accounts, should a customer wish. Schrader hints that bill pay and bank transfers will come next to the mobile app's feature set.

The bank expects its stronger digital offerings to not only satisfy new customer wants but also help the bank retain existing customers who are increasingly taking to digital banking. Indeed, the bank's online banking jumped to 900 active users in fourth quarter of 2012 from about 650 in the third quarter. The bank, whose town has yet to support 4G, has 5,000 total customers.

"More people will want to use electronic tools," Schrader says.

Cutting down on teller time might come as a benefit of a stronger digital presence, too. With one caveat: "We are a long-term employer," Schrader emphasizes. "A few days ago, an employee of 54 years retired. We never look at this as a way to get rid of employees. …The fact is we are losing long-term employees to attrition. …This is a way for us to look at solving these problems."

- Mary Wisniewski
Stanford Federal Credit Union Stanford Federal Credit Union HQ: Palo Alto, Calif.

Asset size: $1.4 billion

Project: Core banking and telecom overhaul combined with process redesigns.

Why we chose it: The credit union took its IT infrastructure through massive change, paying close attention to best practices and efficiency.

The elite membership of Stanford Federal Credit Union, who work at Stanford University, its hospital and its linear accelerator, have high net worths, high credit scores, and a special fondness for technology - 90% of member interactions take place through computers and mobile devices. Although the credit union does have a smattering of branches, branch volumes are low. "Most of our membership does everything online, on mobile or with debit or credit cards," says CIO Jim Phillips. "They prefer to be that way; it's not us pushing them."

This customer base makes technology prowess and efficiency essential to the credit union. "They're very brainy and they'll let us know if they don't like something," Phillips told us earlier in 2012, when Stanford FCU had just completed a core banking and telecom technology overhaul and replaced online banking, mobile banking and voice response systems.

In the next phase of this project, it's working to improve process efficiency and integrate systems throughout its infrastructure.

As part of its contract with core provider Open Solutions (which was bought by Fiserv in January), Stanford FCU worked with The Raddon Group, a consulting firm Open Solutions acquired in 2006, on process improvement. "Raddon came out well before we went live with the new core system and looked at transaction times, process workflow, how we do reconciliation," Phillips says. "They timed and documented all that. Several months after we went live, they came back and reevaluated all those same things: How did we improve transaction times? Where do we have potential inefficiencies now that we've been on the new system for a few months?" The consultants recommended more efficient workflows, for instance in the area of loan fulfillment. After the new platform, called DNA, had been in place for a couple of months, Phillips' group realized that even though all employees had been trained the same way, they were handling processes, such as opening a money market account or billing a consumer loan, differently. After finding the most efficient methods, the credit union then retrained everyone on those.

On the telecom side, the credit union upgraded its phones and networks - including fibre switches, new routers and switches, new firewalls, multi-protocol label switching and data center equipment - just before the core conversion. It implemented unified communications and voice over IP from Cisco. The system includes presence awareness that tracks where people are and their status - on Outlook, on the phone, on a mobile device, in the office and available - and tying that into internally developed apps. Within the consumer fulfillment app, for instance, the unified communications could identify any consumer loan experts and their availability. A skills-based routing list suggests teams of experts for product and service features.

By replacing the PBX boxes and other older telecom infrastructure with voice over IP and unified communications, the credit union is saving about 60% in ongoing telephony costs, Phillips says. It uses videoconferencing to communicate among its four branches and corporate site, for branch manager and operational team meetings. The virtual call center team also meets regularly via video.

Going forward, the credit union plans to roll out video chat in its call center to provide support for members. Phillips' developers have begun building apps that work with the DNA platform using Open Solutions' DNAcreator toolkit, starting with an app that automatically refunds ATM fees to members who meet certain criteria. Other apps are designed to improve internal efficiency and streamline the back office.

Phillips says the credit union's ability to accurately analyze data and make sound decisions based on it has improved since the conversion. "We used to have so many disparate places we had to go," he says. "Data and analysis was always in question."

The credit union's financial system for general ledger and accounting is now integrated with DNA. Managers' dashboards and monthly reports are all based on the same set of data.

The new systems have allowed Stanford FCU to roll out mobile deposit capture for the first time. Mobile banking is truly integrated with the core system. "In the past it was a standalone product and we had to do a lot of stuff in the background to make that work well," Phillips says.

Where before, the credit union had several different lending systems, which created complexity and problems, now all of its loans - commercial, participation, consumer - are serviced on the same system.

Closing the books at the end of the month, which used to take several days, sometimes more than a week, is now done in days. Account opening and loan fulfillment times have improved. Back office processes such as statement production have improved; that process only takes a couple of hours now.

"We run our nightly process in less than 40 minutes," Phillips says.

SFCU tried to prepare its staff and members for the project through blogs with timelines, links to informational videos, and details on the differences and improvements they could expect post conversion.

In 2013, the credit union plans to integrate internal systems and innovate.

"We're devoting next year to member-focused innovation," Phillips says.

He's started up an innovation committee that will soon have its first session. Speakers from Google, VMware, Facebook, and Ideo will share ways to improve mobile and online banking. "I expect we'll see a push to deploy a person-to-person payments capability, whether that is partnering with a Facebook or Google or other electronic wallet program out there, so you don't have to carry your credit or debit card around," Phillips says.

- Penny Crosman
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Penn Liberty Bank Penn Liberty Bank HQ: Wayne, Pa.

Asset size: $560 million

Project: Upgrading online and mobile banking, improving security.

Why we chose it: The bank has implemented state-of-the-art single sign-on for consumer and business accounts.

Competitive pressure drove Penn Liberty to enhance its online, mobile and security technology.

"We are based in the western suburbs of Philadelphia... and we have been sticking to our commercial banking roots," says David Griest, CIO. "We don't compete with too many local banks, so we need products and services that compete in that [Bank of America, Wells Fargo and PNC] arena."

For the eight-year-old bank with few branches, last year's implementation of a new mobile and online portal was the fruition of a decision Griest had already made while on a visit to Austin tech vendor Q2ebanking two years earlier.

"It's a single sign-on platform. The owner of a business can look at his business accounts and his personal account," he says. If a small business owner wants to approve an employee's bill payment or wire transfer or check his personal account balance, she only has to sign in once on any device.

Penn Liberty now offers its customers mobile applications for Google's Android mobile operating system and Apple's iPhone. The technology includes remote deposit capture, which cuts down on the number of checks Penn Liberty employees have to handle and flags ACH and wire fraud.

The platform also uses added layers of authentication.

- Sean Sposito
First Financial Bankshares First Financial Bankshares HQ: Abilene, Tex.

Asset size: $4.2 billion

Project: Mobile photo bill pay.

Why we chose it: The bank is one of the very first to try this technology, an evolution from mobile check deposit.

Though First Financial Bankshares had yet to offer customers smartphone apps just over a year ago, the bank is readying mobile functionality that should propel it ahead of what most big banks offer their mobile customers. That feature, expected to hit in the first quarter of 2013, will allow FFIN's customers to snap photos to pay bills.

"This sets us apart," says Jeff Casey, vice president of alternative delivery channels, First Technology Services, a wholly owned technology subsidiary of FFIN. "It's a competitive differentiator."

Picture Pay, the name of the service powered by Mitek Systems, is supported by Malauzai Software and Allied Payment Network and is meant to work like this: Consumers take a photo of a bill statement, confirm the amount to be paid via the mobile device, and submit the amount owed through the financial institution.

Though Picture Pay is currently only available for friends and family, Casey already anticipates a number of benefits, including an opportunity to charge users for services like expedited payments, for example. Another expected gain for the bank from Picture Pay?

"It will increase our mobile adoption across the board," predicts Casey.

Though customers can use the feature for many bill types, Casey views one-time bill payments and fluctuating monthly bills as likely candidates for it. As far as what thresholds are set for risk, he sidestepped the specific parameters as the bank was continuing to refine those rules as of mid-January.

The latest announcement supports the mobile initiatives the bank first formalized in late 2011.

"We quickly realized that just launching an iPhone or Android app wasn't the right approach for our mobile strategy," he says.

Part of those strategy plans included making a conscious move to set mobile up separately from online banking for two primary reasons: the ability to move faster in the mobile space and to have offerings available to those individuals lacking desktops.

Since that decision, FFIN debuted iPhone and Android standalone apps. It also rolled out SMS text alerts and mobile remote deposit capture in 2012.

Casey says the bank is working on debuting a native iPad app and plans to reevaluate its overall mobile strategy.

FFIN estimates that by shifting the transaction mix from higher cost voice and branch channels to digital touch points, the bank will save an estimated 20% on transaction costs.

- Mary Wisniewski
Bay Commercial Bank Bay Commercial Bank HQ: Walnut Creek, Calif.

Asset size: $316 million

Project: Cloud computing.

Why we chose it: Very few community banks have embraced the cloud.

Bay Commercial Bank was faced with an impending server refresh and was looking for a way to securely and efficiently move its Windows server infrastructure off premise, as it has already done with its hosted core banking system. But rather than settle for a more traditional colocation or hosting arrangement, the bank chose Compushare's Cloud Computing C3 solution.

"If it's installed correctly, cloud computing is the right kind of product," says Janet King, executive vice president and chief operating officer. "You should realize no difference than if that server was in the room across the hall. It should perform the same or better in terms of response time, and you should have the same experience you would normally have locally. You just don't have the headache of having to maintain it yourself, somebody else is doing that."

About 99% of the bank's infrastructure has been moved to the cloud. This includes apps such as Deposit Pro, LaserPro, TSoft, Outlook, CallReporter, QuickBooks, and FileMaker Pro. "The biggest beauty of it for me is we're in a growth environment and we can add another location in a matter of hours as opposed to weeks or months," she says.

King did not rush into this decision. "It's new to our industry," she notes. "I could not call another bank and get a recommendation and see what they had gone through."

- Penny Crosman
Marine Bank & Trust Marine Bank & Trust HQ: Vero Beach, Fla.

Asset size: $140 million

Project: Converting to Office 365, a cloud-based email offering, from an in-house 2003 Exchange server.

Why we chose it: By going to the cloud for its email services, the bank eliminated the need to maintain three servers.

Having nursed an aging Microsoft Exchange email server whose last software update occurred in 2005, the time had more than come in 2012 for Marine Bank & Trust to tackle a conversion. Commandeering the project, Deric Meadows, assistant vice president of information technology, struggled little with his decision to stay with Microsoft.

"It's hard to go wrong with the person who built the product," says Meadows. Yet, the bank still had to decide: to go to the cloud or stay in-house? In searching for am answer, Meadows hopped on Google to see who offered what and discovered that Jack Henry, a major core provider to community banks, was a reseller of Microsoft's cloud-delivered version of Office.

Though the bank evaluated several options, Marine Bank & Trust settled on Jack Henry's offering because of its "great customer service," extensive banking industry knowledge and strong security, says Charlie Gisler, CFO.

As of December, the bank completed its conversion of 30 employees onto Office 365, a cloud-based email from its in-house 2003 Exchange, with help from Jack Henry. The upgrade, according to Meadows, was simple, though he had to manually upload the mailboxes on each computer.

Though Microsoft says it does not break out specific customers by industry, the bank is one of only a few financial services players that BTN has seen adopt Office 365. Already, Marine Bank & Trust expects strong benefits from the conversion, including the elimination of three servers. "That's a huge cost savings when it comes to buying new ones," Meadows says, estimating the cost per server as $15,000. Office 365 comes with predictable, monthly per-user costs. "We really know what we'll be paying," Meadows says.

Another immediate benefit to using a hosted solution, to a small bank with only two branches? "It simplifies disaster recovery for email in a secure data center," he says. "The backup is basically instant." Should customer concerns arise, including for email or other Office apps like Instant Messenger and online meetings, Jack Henry will serve as the help contact. "They are the first line of support," Meadows says.

From a user experience, not much is unfamiliar to the staff as they are still using Microsoft Outlook, albeit a slightly updated version, he says. Plus, some employees will gain the option of using iOS devices, which weren't available to them while the bank ran on its in-house email server.

- Mary Wisniewski
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The Guernsey Bank The Guernsey Bank HQ: Westerville, Ohio

Asset size: $130 million

Project: Virtualization of almost all servers and desktops.

Why we chose it: Complete commitments to virtualization are still relatively rare among community banks.

The president of Guernsey Bank, Bob Patrella, was not happy with IT performance. "He wanted to make a dramatic change in the way we do IT," says John McConnell, IT manager and chief security officer. "He thought we were too slow in responding to things, and not very efficient."

The bank brought in consulting firm Lithik Systems, also in Westerville, which gave the bank three options - virtualize some servers, all servers or all servers and desktops. The bank president chose the most dramatic change. Efficiency and better security were two primary goals of the project, which was spearheaded by McConnell and his one colleague in IT.

"In a virtual environment we're able to detect viruses and delete them immediately," McConnell notes. "We can delete an entire virtual machine instantly."

The bank bought three HP servers and VMware virtualization software. It bought a new storage array that uses solid state disks, which helped improved the slow initial performance of the virtual desktops. Employees now use Microsoft Windows Thin PC. Also under the "simplify IT" directive was a switch to hosted voice over IP and MPLS.

Looking forward, the bank is considering a core banking upgrade, which McConnell believes will be eased by the virtualization project.

- Penny Crosman
Chemical Bank Chemical Bank HQ: Midland, Mich.

Asset size: More than $5.8 billion

Project: Installing a biometric fingerprint reader from DigitalPersona.

Why we chose it: Biometrics are the way of the future; the technology will replace passwords, which have become obsolete.

At Chemical Bank, employees no longer have to stress about recalling their ever-changing, work-related passwords to dozens of applications.

That is because the Midland, Mich.-based bank installed a biometric finger reading product in March of 2012 that eliminates the need to recall codes. "We wanted to get away from people having to remember to bring something," said Gary Richardson, CIO, in an email interview with BTN.

"Everyone brings their biometric signature with them each day, so it made that type of solution an easy choice."

The bank, which employs 1,800 people, decided to use technology from Redwood City, Calif.-based DigitalPersona, a provider of fingerprint identity tools. "We did a fair amount of searching in terms of biometric tools," recalls Richardson. "DigitalPersona offered a simple solution that had already been deployed in many companies both large and small. The ease of use is what sold us eventually."

The biometric technology used by Chemical Bank works like this: When an employee is prompted with a password screen or a password change screen, she places a finger on a DigitalPersona reader. Then a template that the bank built within DigitalPersona recognizes that a password is required and inserts one associated with the employee's fingerprint.

Touching to access bank apps required Chemical Bank to get its employees comfortable with the new biometric protocol, a process that went fairly smoothly because of the benefits to employees.

"Employees were so frustrated with having to remember passwords that a large sales job was not necessary," says Richardson. "We ran a small pilot with about a dozen employees and the solution sold itself. Word-of-mouth spread quickly on how easy it was to liberate yourself from passwords."

Initial training, however, required a little more attention than Richardson first expected. "We started with a 'train the trainer' program, but we found that employees needed a little more exposure to the tool before they were turned loose with it," he says.

To enhance understanding, the bank created a short training class that employees could attend. For those participating, the bank expired their passwords during the workshop so they had to use the solution right away. "That made a big difference as well," Richardson says.

Since deploying DigitalPersona's technology, Richardson says the biggest change for Chemical Bank has been an improvement in customer service. Before the biometric solution, employees had to reach out to the bank's help desk if they locked themselves out of the system, which was problematic for a teller that had a customer standing in front of him. "Now, the instances of an employee requiring that potentially long help desk call are significantly reduced," he says. "Additionally, the frustration level for employees has been reduced."

Beyond better service, Richardson views the biometric implementation as an information security gain since employees are no longer writing down their passwords on pieces of paper around their work areas.

On Chemical Bank's drawing board are projects to implement mobile banking, replace call center technology and implement a virtual desktop environment and unified communications.

- Mary Wisniewski
Team Capital Bank Team Capital Bank HQ: Bethlehem, Pa.

Asset size: $930 million

Project: Developing apps internally to turn IT into a profit center.

Why we chose it: It's one of the most ambitious plans for IT profitability in the industry.

Team Capital Bank in Bethlehem, Pa., has for more than a year cherished the goal of turning the technology department into a profit center by 2013.

In 2012, the bank's seven-member IT team launched a new business called BOLTS (Bank Operations Library of Tools & Services). The group generated $200,000 in net income during that first year.

The team has built its first application, ACH Manager, for its new core platform from Open Solutions and is going through the vendor's validation process. "Our goal is to get this one rolling," says executive vice president and CIO Ghan Desai. "There's a customer who wants this right away. Everything we've done has been with commercialization in mind."

ACH Manager is a fraud and compliance tool. It validates the customer, enforces a daily credit limit set by the loan officer, and resets the limit based on new data and events. It performs OFAC checks.

Desai and his team have also created an online banking app that allows call center reps and other bank employees to help customers with online banking issues such as unlocking accounts, resetting passwords or getting one-time passcodes. Future apps include data marts for remote deposit capture, ACH, business online banking, bill payment and consumer online banking.

- Penny Crosman

What they lack in deep pockets, small banks often make up for in agility and a willingness to try new technologies. Bank Technology News presents the top community bank IT projects of 2012.

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Posted by byelsxei i | Wednesday, March 20 2013 at 4:37PM ET
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