It was enough to make a solutions vendor shudder: hundreds of bankers applauding the notion that maybe it's time for financial institutions to stop acquiring new technological bells and whistles and learn instead to use the IT they already have more effectively.
The impromptu remark by Tom Brown, chief executive of Second Curve Capital and director of its Web site, bankstocks.com, came during the keynote session of the Bank Administration Institute's weeklong Retail Delivery 2000 conference and tradeshow, which wrapped up Dec. 1 at New Orleans' Ernest N. Morial Convention Center.
Stop acquiring new technology? Well, not exactly.
In fact, a moment or two after Brown's applause-prompting observation, the investment company owner, who left Tiger Management a year ago this month to form Second Curve Capital, put his earlier statement in context: "There are a wide variety of technology solutions [for banks]," he said, "and many of them work well and are reasonably priced." He explained that he'd merely been suggesting (as so many conference speakers were to do before and after Brown) that managing customer relationships requires much more than well-written software, powerful servers and sophisticated data warehouses.
Still, the remark rated a hasty asterisk in my notebook--not because of its substance but because of the enthusiastic reaction it drew. Later, I mused to myself, "Who could blame bankers for embracing the idea that it's all right to stop obsessing about the next big thing and concentrate on exploiting existing technology to the fullest?" These days, with evidence of an economic slowdown mounting, such a conservative view seems especially sensible. After all, if the so-called soft landing grows bumpier, a well-earned hiatus from the pressures of keeping up with the other guys' technology might be just what the bottom line needs.
Trouble is, that sort of conservatism--wise in many business contexts--may well be a prescription for disaster where bank technology is concerned. There's simply too much going on right now to put the game on hold. Banks would do well, I think, to continue scrambling as hard as ever to stay abreast of the latest/greatest financial services applications. Like it or not, the competitive environment that created their sense of urgency about not being left behind technologically not only persists at the beginning of 2001 but is growing more ominous every day.
And the multibillion-dollar stakes in this battle--whether it's the battle for retail customer wallet share or commercial customers' cash-management business--are going up, not down.
Recently published research by The Boston Consulting Group, or BCG, illustrates the danger of taking a break from the technological rat race. "The traditional payments business, both retail and wholesale, is being inexorably squeezed as regulatory demands, customer sophistication, revenue pressure, investment requirements and strong new competitors all threaten banks' core payments franchise," the consultants write.
The driver of this threat is the Internet, of course, and the authors of the BCG report, titled "Global Payments 2000/1," note that banks may lose out to online providers that are already establishing dominant positions in the micropayments and aggregation services businesses. Another major threat comes from the world's telecommunications giants, which are "beginning to exploit their extensive billing relationships and market penetration to provide alternative online payment solutions."
In this race to protect threatened market share, the BCG research maintains, banks "have everything to lose." Fortunately, the consultants also contemplate scenarios in which banks will beat the new competitors by leveraging the core strengths of financial institutions, including their unrivaled position as trusted intermediaries. In this view, banks would take up residence "at the centre of the new Internet world."
If, in 2001, banks decide to stop acquiring new technologies and opt to concentrate on using what they have more adeptly, their prospects of winning the race for New Economy dominance of financial services will be diminished, I think, and significantly.
There's nothing wrong with tapping legacy technology fully, but pity those institutions whose managers forget that even the best of what's here today may be obsolete when the next killer app debuts.
But, you know, I'm probably preaching to the choir here. The bankers on hand for RDS--even those applauding loudest in response to Brown's remark--know very well that IT developments for ecommerce and other financial services are continuing to advance ... and not just rapidly, but at Internet speed.
Perhaps more to the point: for all of their technology implementations to date, only the most aggressive of first-mover institutions have really even begun to tap what the wizards of the world have made possible. In addition to wireless financial services technologies--effectively still in their infancy--it's clear that some of the more traditional banking IT could do with some major tweaking in today's marketplace. Customer Relationship Management, or CRM, applications are one obvious example, as this month's RDS coverage suggests.
Sure, it would be wonderful if senior bank executives could focus exclusively on running the kind of bank their grandparents patronized, if only until the economy heated back up. Unfortunately, that comfortable perspective is dead wrong.