I recently attended the BAI Retail Delivery Conference as a panelist discussing social media in banking. While I was there, I had the opportunity to attend a number of the other sessions. Based on the attendee list, a wide range of banks and credit unions was represented. There were, of course, an equal - if not greater - number of vendors, consultants, and industry analysts in attendance. Most of the sessions included vendors paired up with representatives from many of the largest banks in the U.S.
Many vendor and industry analysts suggested in these sessions that as an industry we need to be moving to a more integrated sales and servicing model. They were harping on the banks thinking strategically when many banks are too dependent on the vendors themselves to control their own fate. This highlights the challenges small banks face versus the big boys.
With more than 8,000 banks and 7,500 credit unions in the U.S., a large majority are outsourcing to one of the many large core providers in the market today. While bankers may recognize the fact that their data cannot be integrated across their various customer delivery channels, they are dependent on their technology partners to develop solutions that address that need.
Since outsource providers serve such a large and often disparate customer base, their needs may not align with the more aggressive banking organizations. The concerns of a bank in a very technology-savvy market competing with the country's largest banks are much different than those of a community bank that is the primary financial institution in its area.
If you are one of the larger organizations in the country, you probably manage your core systems internally. Having worked as a technology leader for a "too big to fail" bank, I do understand the challenges. Oh, sure, you have turf wars, funding constraints, regulatory issues and shifting priorities. But at the end of the day, both the business units and technology are in the same organization and should theoretically be working toward the same goals. As noted above, this is certainly not the case for the majority of banks and credit unions.
Our organization just completed a grueling core review process this fall. We began this rather arduous process because our current core system is being discontinued. Over the years, we have cobbled together various pieces of software to deliver the products and services we need. For example, we added an online account opening process that was not integrated to the core. Foxtrot, a tool that automates data management tasks, helped us overcome this by automating the process behind the scenes. We've used it extensively for other processes that weren't available through the core. Not particularly elegant, but it's gotten the job done.
Over a year ago, we added a mobile banking application to our offering from our core provider. This now includes a text banking option, mobile browser and a generic iPhone app. Android, one of the fastest-growing mobile devices, is in development. Currently, more than 10% of the traffic to our website is from mobile devices and half of that is from Android devices. That number has increased exponentially over the past months and is expected to continue. While our core provider is building out its mobile offering, along comes the iPad, the newest technology to change the mobile landscape.
As Bank Technology News reported in July, Citibank has already unveiled an application specifically designed to enhance the user experience for an iPad customer.
I'm confident that many of our larger competitors are doing the same. We are finding that consumer appetite for mobile use and evolving tech solutions are putting tremendous stress on third-party development plans.
We looked at most of the leading core providers, and had an opportunity to meet with and talk to many banks across the country. It became clear that each of these platforms has strengths and weaknesses, and no solution is perfect. All the solutions looked to offer far more integration than our current technology, as you would expect after being on the same core for over 10 years.
The true value of any vendor comes when they identify industry trends and proactively develop solutions to address those trends.
Wish lists for vendors aren't the answer. One of the problems with wish lists, especially in technology, is their tendency to be fluid. Who anticipated the iPad with its quick adoption rate, basically jump-starting the tablet market?
What I really want from these vendors is some input into their development and strategy. It seems that this mostly takes place behind closed doors and is a done deal by the time they involve their customers. Not a particularly inclusive business model.
Many opportunities are emerging for banks. The whole evolution of payments is a big deal. Servicing the unbanked and/or the underbanked offers a chance for growth.
The impact of Dodd-Frank on our interchange revenue stream and its alternatives is another area in which vendors could help their bank clients adapt. We are dependent on them for systems that can help us adapt to the ever-changing environment, and I just don't see them doing that with any consistency.
So don't keep telling us what we have to do to stay competitive and keep up with our customers' needs. We know where we want to go. We need you to help lead the way.
