Senior bank managers have mixed feelings about technology's role in achieving their wholesale business objectives, but most feel that greater systems investments are needed to grow fee income, according to a research study.
The study, sponsored by the American Banker, Andersen Consulting, and the Tower Group, is based on a survey of 150 of the top bank holding compames in the United States. The findings indicated that over the next several years, business issues most likely to be supported by technology will include developing new products, enhancing alternate delivery channels to customers, and improving relationship management.
Yet, while managers say that technology is playing an important role in wholesale business issues, the survey shows a sizable discrepancy between expectations and reality. Most feel technology hasn't impacted their business goals as much as they would like.
The majority of respondents felt that technology spending in the last three years provided |'some" and "moderate" added value in achieving business objectives. But 37% said that technology had no impact on business results. Further, many managers that say value has been added can't really pinpoint the tangible effects.
According to Daniel R. Pfau, partner at Andersen Consulting, Boston. one reason wholesale banks are not sufficiently accomplishing business objectives with technology is because there's no alignment between bank managers and technology officers as to where investments should be made.
"Business managers may be diffusing the technology focus to areas not critical to the bottom line," he said.
Another factor, said Mr. Pfau, is the high number of aging computer systems still used in corporate banking.
Twenty six pement of wholesale-banking technology is viewed as obsolete and needing replacement, according to the survey. Many managers perceive these systems as obstacles to achieving objectives, said Mr. Pfau.
Finally, a full 52% of survey respondents said they had no technology "vision;' or a sense of what role technology should play m supporting business objectives, and how it should be deployed.
Only 38% of the banks have two- to three-year technology plans, the survey found, while longer-term plans are even more scarce.
The duration of a plan is important, said Mr. Pfau, because "it takes time for the fruits of a vision to pay off."
The survey also revealed a lack of communication between business managers and technology officers, so that many managers are not even aware that a, technology vision exists. Others don't have a good understanding of how technology relates to the bank's business goals, the survey found.
There are a number of things banks can do to improve the value of technology in their institutions, said Mr. Pfau. such as focusing technology investments where they are most likely to pay off.
The survey found, for example, that technology doesn't add value in a number of areas, such as improving the management of credit risk. Bankers did perceive a higher value from technology when used to reengineer the back office, however.
It's also important for banks to keep their technology environments up to date, he said, and to develop and institutionalize a technology vision, Mr. Pfau said. Banks should focus on communicating the plan, building consensus, and using it as a guide to the deployment of technology, he added.
Finally, banks should make technology officers part of the management team, said Mr. Pfau. "They should allow the technology community to contribute to the business strategy and decisions on how technology can support those objectives. This will help to close the alignment gap."
One bank that feels it has been successful in implementing a sound technology strategy for its wholesale business is First Union Corp., in Charlotte, N.C.
The key is not tying new fees to old products, said Judge W. Fowler, director of systems development at the $72.1 biBion,asset institution, but introducing new fee-based products - such as equity, derivative, and loan-syndication products - to more effectively compete with nonbanks.
"We're trying to provide a much broader range of products and services to better meet the cash flow and credit needs of wholesale customers," he said.
At the heart of these objectives is an investment in technology, which Mr. Fowler said is "critical to retaining customers and producing revenue."
Technology is at the core of the bank's alternative-delivery strategy, said Mr. Fowler, including the development of electronic data interchange services, treasury workstations, and cash management.
As for technology planning, Mr. Fowler said that the bank has a technology vision, architecture, and set of standards. "We know where we're trying to go and tie our technology strategy directly to the bank's vision," he said.
In this way, said Mr. Fowler, technology can be an asset that "ultimately separates one competitor from another."