For community banks considering near-term investments in technology projects, the financial crisis may represent an opportunity to do so at a reduced cost.

With the industry continuing to consolidate and fewer new banks opening, vendors have become more intent on attracting and retaining customers, consultants say. Industry watchers said prices have already fallen on some products and could fall even more over the next year in areas where a quick return on investment is not evident.

Brad Smith, the president and chief executive officer of Abound Resources Inc. in Austin, said conditions favor accelerated technology plans at banks that have the capital for it.

"A couple things have become very clear," said Mr. Smith, a consultant who helps banks with their technology purchases. "Our vendors are going to be impacted more than they have been, and many big-name vendors have already been hurting. So it's a great time to be buying for those that have it planned, because vendors are willing to negotiate much deeper than they have."

The issue is a sensitive one for vendors, who in general do not like to talk publicly about how they price their products — even in boom times.

They say they have not lowered prices across the board, though Paul Danola, the senior vice president of the financial institutions group at Metavante Technologies Inc. in Milwaukee, acknowledged that some products have "been under more pressure" this year.

Mark Sievewright, the corporate senior vice president of market development for Fiserv Inc.'s depository institutions group, said Fiserv's prices held steady in the first and second quarters. He said he could not speak about the third quarter because the publicly traded company has yet to release its results for the period.

On products where banks can see a return on their investment quickly, such as remote deposit capture, sales continue to increase despite the economic slowdown, Mr. Danola said.

Mr. Sievewright said: "What we have noticed is a lot of discretionary spending has been cut. Banks are cutting nonessential things. … But when it comes to initiatives that either serve to improve efficiencies, cut costs, or improve revenues, we haven't noticed a lot of difference."

Banks around the country are tightening their belts to preserve capital, but many community banks that have been less punished by the credit crunch can still afford to continue with plans to upgrade technology, several bankers and industry observers said.

Around half (48%) of the 1,280 banks polled for the 2008 Independent Community Bankers of America Community Bank Technology Survey said they would spend more on technology this year, with about 60% saying said tech spending would account for as much as 9% of their noninterest expense. (The survey was conducted in June and the report came out this month.)

Avivah Litan, a vice president and research director at Gartner Inc., a market research company in Stamford, Conn., said that she has not seen prices come down in the security and fraud detection area in which she specializes but that she expects a drop of up to 15% over the next year.

"It's business as usual, but I think that will change very quickly," she said. "Vendors are all scared because they sell to banks and the number of banks is shrinking. … It's a good time to start looking for something you can build a business case for."

Ms. Litan said technology contracts typically take six to nine months to complete, so she advises banks to start negotiating with vendors now because prices could increase once the economy picks up.

The $1.2 billion-asset CoreFirst Bank and Trust in Topeka, Kan., expects to increase its technology spending over the next few quarters as it adds roughly a dozen new branches, so it would welcome any price reductions, said Steve Huff, its senior vice president for information technology.

Mr. Huff said vendor representatives have always offered incentives to try to win banks' business, but lately he is sensing an even "greater willingness to deal because of where we are with the economy right now."

The $800 million-asset Citizens National Bank in Henderson, Tex., is upgrading its Web site, online banking, and account opening system to better compete in its markets. Brad Tidwell, its president and CEO, said Citizens has received more attention from vendors than he had expected, which he said should lead to cost savings. "I can tell you we are having no problem finding people who want to tell us about their products or services," he said. "They are aggressively trying to get on our shortlist."

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