Even though economic recovery still has a long way to go, we have all heard enough of the bleak forecasts and are ready for some positive news.
The greatest opportunities often exist during economic lows and recognizing and acting on those opportunities is what fuels a faster recovery. Financial institutions are beginning to see rays of sunlight through the gray clouds that have hung over the industry for the past several years - because they have seized the opportunity to act upon the need for change.
Zoot Enterprise’s CEO Chris Nelson previously stated for publication that for the banking industry the year would be one of adapting to change. After many years of bank portfolios remaining relatively static, the industry was faced with the fallout from the recession of 2007; the mortgage meltdown, high unemployment rates, atypical defaults and changes in consumer behavior that made credit scores less predictive.
He foretold that banks would be refining credit logic to make sure lending opportunities were not missed (or misunderstood) and that they would invest in a technology infrastructure with the flexibility to meet the demands of the new lending environment. That has proven true.
While getting back to basics was a priority for banks a couple of years ago, there was also recognition that the lending world had changed forever and business processes needed to be updated if banks were to keep up.
The increasing difficulty of identifying quality credit customers and an uptick in accounts going to collections, signaled for a strategy shift that could no longer be put off while waiting for a complete market rebound.
Banks understand that changing their credit risk policies more frequently and taking an enterprise approach to managing accounts across the credit lifecycle is both a preventative measure and more effective when accounts become delinquent.
This understanding has driven a lack of tolerance for inflexible solutions that meet their needs one day, but not the next. Technology spend that was on hold indefinitely has been restarted and is focused on more creative approaches to solving banks’ business challenges. Here’s an example.
Traditionally, banks relied on internal IT resources to ensure all of their systems were integrated and functioning. Sweeping regulatory changes have made keeping up with new regulations and ensuring compliance a full time job for these already taxed IT groups. Managing the recent explosion in fraud related activities makes their load even heavier.
In response, banks looked to vendors to provide additional support in an unconventional way. Rather than the banks’ IT staff spending valuable time figuring out how to cobble together their new vendor solutions, they asked the vendors to work together to integrate their capabilities to address the banks’ business needs based on the parameters they were given.
Whether combating fraud, speeding up the credit origination process, providing a better customer experience or all of the above, banks are ensured they are getting the right combination of functionality using this approach. It is more efficient for them and a good opportunity for collaboration between solution providers.
The months of November and December are typically quiet for embarking on new technology projects and issuing RFPs. Budgets are being decided for the following year and the holidays take many people out of the office.
This year is a different story. Banks are actively seeking technology solutions that will help them grow revenue, manage regulatory changes and mitigate risk effectively. They want these new projects to be in production in the first half of 2011.
While economists are predicting painfully slow, yet steady gains in 2011, a busy end to the year for technology spending in the financial sector is a welcome change and a sign of blue skies ahead for economic recovery.
Dennis Dixon is president of Zoot Enterprises, in Bozeman, Mont. His e-mail is: dennis.dixon@zootweb.com.
