For community banks, technology can be an enabler—or a source of continued frustration. At times, it can feel like a money pit, out of which bankers are anxious to climb.
But there are community bankers who sound almost giddy when talking tech. They described it to ABA BJ as “integral to the bank”; “something I’m passionate about”; “exciting.”
Frank Sorrentino, chairman and CEO of $729 million-assets North Jersey Community Bank, Englewood Cliffs, N.J., says, “We see our bank partially as a technology company. We are a local community bank, but we also have a powerful technology engine that fuels the type of products found at a money center bank.” For example, when remote deposit capture emerged, many community banks took a wait-and-see approach. In contrast, North Jersey Community jumped in and picked up a substantial client base as a result. “A lot of our ability to bring our business customers in as depositors revolves around our ability to serve them electronically,” Sorrentino says. In 2011, six of the bank’s ten most profitable, recently acquired customers didn’t set foot in a branch.
While no one is suggesting that bankers discard deposits and loans for bits and bytes, even those with a love-hate relationship with technology can make technology work for their organizations. Here’s how.
1. Include tech in strategic plans
Getting the most out of technology requires aligning technology priorities with a bank’s strategic goals. But most banks fall short, according to the results of Abound Resources’ recent community bank survey. While CEOs place a high priority on improving sales and marketing as a growth strategy, the top five tech priorities from IT, operations, and finance executives won’t move the needle on that strategy, notes Brad Smith, Abound Resources president. “Banks need to connect the dots by creating a technology plan based on strategic objectives,” he says. “It’s not difficult, but very few community banks do it.”
Among those that do: $800 million-assets Ohio Valley Bank, headed up by Chairman and CEO Jeff Smith and headquartered in Gallipolis, Ohio. Last year, one of its five strategic initiatives was “Utilize Technology to Create Opportunities for Income and Savings.” The bank focused on cost-saving technologies, including electronic-document delivery. The initiative succeeded. E-statements alone saved the bank $85,000 in postage in 2011.
Bryna Butler, the bank’s assistant vice-president and director of e-services, explains that to drive income, Ohio Valley Bank partnered with Jack Henry & Associates, Inc., and Truaxis to offer e-coupons to customers through a revenue-sharing relationship with national merchants. The bank hopes to offer its StatementRewards platform to local merchants in 2012.
Each year, Independent Bank, a $2.3 billion-assets institution based in Ionia, Mich., creates a list of four or five measurable business objectives—such as deposit growth, asset quality, or expense reduction—that tie back to the bank’s overall performance strategy, explains Pete Graves, CIO. During a process the bank calls “business discovery,” business units work with IT to create cases for new technology initiatives that support those measurable objectives. “What makes this approach successful is that we define our requirements before looking for a technology solution,” says Graves. “Sometimes the solution is already available in another business unit, so we try to leverage existing platforms and applications to decrease costs and complexity.”
The biggest challenge to this approach, notes Graves, is encouraging management to take time to truly digest and document requirements to support what the bank is trying to accomplish. “In the past, business units would start down a path, then IT would try to catch up, resulting in less-than-optimal solutions,” he says. “Now, IT is out in front, which makes the process less painful and more successful for both IT and business units.”
2. Make use of a tie-breaker
Randy Roth, CEO of Vitex, says one of his goals as a bank technology consultant is to help bankers think beyond their day-to-day challenges and focus on technology from a strategic viewpoint. Says Roth, “There is always a trade-off between cost and resources and business-unit goals. A facilitator can be the tie-breaker and provide an unbiased view of the technology project.”
Vendors also are willing to lend a hand. For example, Wausau Financial Systems offers strategic road mapping to help banks execute technology initiatives that support their strategic goals, according to Steve Buchberger, senior vice-president of solution management.
A strong relationship between the bank and its vendors is key for this shared approach to work. Cummins-Allison’s Curtis Hallowell says, “When we understand bank goals and priorities, we can recommend solutions that are best suited to help them achieve their goals.”
Hallowell, who is vice-president of product marketing, urges community bankers to not let size intimidate them. “It’s not just big banks that can drive technology innovation. Don’t settle for second best. Step up, pound your fists, and tell us what you want. We’ll listen.”
3. Look to the core
When it’s time to evaluate new technology products, most of the bankers ABA BJ spoke with say they look first to their core provider. While the decision is weighed heavily in favor of the incumbent, bankers also review other vendor offerings.
Vendors like Fiserv, Jack Henry, and FIS Global have long provided add-on solutions to their core systems. Today, formerly niche providers are morphing into enterprise-solution providers, says Sam Kilmer, vice-president of market development at Harland. “Banks want to simplify integration by working with fewer vendors,” he explains.
Michael Widmer, executive vice-president at $2.5 billion-assets Northfield Bank, Staten Island, N.Y., prefers to use a single vendor for as much of his bank’s technology purchases as possible. “Rather than bolting on components, such as mobile banking or remote deposit capture, our strategy is to leverage the already-integrated systems of our core provider, Fiserv,” he says. “Integration means efficiencies.”
Across the state line at North Jersey Community Bank, Sorrentino sources applications from core provider FIS Global, even if best-of-breed products have slightly better features or functions. “The tight integration overwhelms whatever nuance may be better from another vendor,” he says. “Plus, having a single vendor drives better pricing.”
Independent Bank’s team takes a similar approach. “Start with your core vendor,” advises Graves. “Integration won’t be an issue.”
Even banks that have been using best-of-breed vendors for ancillary products are switching those systems to their core providers. Jane Haskins, president and CEO of $175 million-assets First Bethany Bank & Trust, Bethany, Okla., decided to convert existing internet banking as well as its award mobile-banking business to FIS Global. Explains Haskins, “We struggled because we had so many products.
Our delivery channels became segmented, and we had difficulty providing balances. We needed to pull back products to our core provider.”
Mark Forbis, vice-president and CTO at Jack Henry, acknowledges that taking complexity out of integration requires some heavy lifting behind the scenes. “As service providers, our job is to make integration seamless for banks,” he says.
4. Be young and young at heart
Ohio Valley Bank’s Smith jokes, “You can’t expect a bunch of gray-haired, old bankers to drive the technology bus.” But, he continues more seriously, “You need to involve younger staff, who value, use, and understand technology.” In addition to an internal, multi-discipline product research team focused on innovation, Ohio Valley Bank created the GenNext Board. This board of 20-something-year-old staff members meets six times a year to suggest ideas for new products and services.
But gray hair hardly precludes bankers from embracing technology. First Bethany Bank & Trust thought that giving iPads to officers in late 2011 would reduce paper printouts at board and loan-review meetings. It also had a hunch that putting technology in the hands of employees—many, bank veterans—would pay off in other, unexpected ways.
The iPads conform to the bank’s security policy, but officers are encouraged to bring the tablets home to watch movies, post online family photos, and download applications. “We told them to go home and play to get comfortable with the technology,” recalls Haskins.
Now during loan-review meetings, employees are recommending new ways to use tablet technology, such as accessing Google Earth and the real estate website Zillow. “We weren’t sure how we would use the iPads, but we’re finding that our employees are rethinking how they view technology,” says Haskins.
5. Reconsider outsourcing
One way to reduce tech headaches is to use a third-party. Even banks that previously kept their technology in-house are now looking to outsource some or all of their systems. Jack Henry’s Forbis suggests bankers take an introspective look at where they add value and consider outsourcing the rest. “The care and feeding of internal technology systems is not as important as generating ROI [return on investment],” he says. “Partner with the right technology vendor, so you can get back to the business of banking.”