WASHINGTON - When the Independent Community Bankers of America began polling members in 2001 on their top technology concerns, systems security was barely on their radar screens.
How times have changed. In the fourth annual ICBA technology survey, released last week, 63% of respondents listed systems security as a major concern, against just 16% in the 2001 survey.
Dewite North, the trade group's chief information officer, noted that the item ranked high in last year's survey as well, with 62% of members citing it as a concern. He attributed the recent increase to the fact that regulators are more closely examining banks' systems to be sure they can detect fraud and are safe from potential "intrusions."
Many banks budgeted more for technology this year than they did in 2003, Mr. North said. Forty-eight percent of those surveyed said they budgeted more in 2004, while only 15% said they allotted less. Tech costs are rising partly because many banks are hiring vendors to do such things as "penetration tests" before examiners' visits, he said.
"These banks need to be able to tell if someone can get into their networks, and that costs money - especially if you outsource," Mr. North said.
The ICBA, in partnership with InFinet Resources of Auburn Hills, Mich., sent surveys this summer to more than 9,000 banks and 912 responded. The vast majority of the respondents have less than $400 million of assets, and half are headquartered in the Midwest.
Affordability is also high on the list of concerns. Though banks are budgeting more, 62% said keeping costs in line will be important.
Mr. North said this shows a change in priorities. A couple of years ago, banks were willing to spend more on technology and offer more services to customers. But now they are more selective, which could explain why many said they are looking into investing in software that can better identify which branches, products, and customers generate the most profits.
"Community bankers have limited resources, so it's crucial for them to carefully select the right technology options to compete against giant financial institutions with exponentially larger technology budgets," Mr. North said. "Community bankers are increasingly challenged to sort through an increasing number of technology choices. They know mistakes are costly."
Bruce Morgan, the chairman, president, and chief executive of the $37 million-asset Valley State Bank in Roeland Park, Kan., suggested that banks may be going overboard in security technology spending.
The Federal Financial Institutions Examination Council changed its examination rules pertaining to information technology several years ago and has continued to add new requirements without properly explaining how banks should prepare, Mr. Morgan said.
Because familiarity with the new regulations is low, banks end up spending too much on security to ensure that they meet the FFIEC's standards, he said.
A firewall from Cisco Systems Inc. is "probably an overkill for a $40 million bank," Mr. Morgan said. "The examiners need to do more outreach."
Other highlights from the survey:
- About 57% expressed an interest in looking into delivering statements by e-mail. Over the past two years that service has been high on the evaluation list, but only 14% banks offer it.
- Of the banks polled, 72% believe their technology is at or ahead of where they want it to be.
- Seventy percent of those surveyed said they have no interest in installing talking automated teller machines, and 69% said they are not interested in Internet-enabled ATMs.
