ROBERT BESSEL
Productivity enhanced
The technology needs for community banks have become a greater concern as Check 21 is officially introduced and Internet banking becomes more commonplace. But in a nationwide study, banks are saying they spent more on technology in 2004 than they had planned.
The fourth annual Community Bank Technology Survey conducted by the Independent Community Bankers of America and Infinet Resources, a firm that assists with technology and financial service needs, found that 63 percent of community banks cited affordability and 62 percent named security as their top technology concerns.
According to ICBA, that indicates a shift in priorities for community banks. In previous years, community bankers indicated heightened interest in finding new technologies to remain competitive. Today they are seeking ways to affordably compete, while maintaining a high degree of systems security.
ICBA Chief Information Officer Dewite North points to growing technology options for community banks as the reason affordability is a large concern.
“Community bankers have limited resources, so it is crucial to carefully select the right technology options to compete against giant financial institutions with exponentially larger technology budgets,” North said. “Community bankers are increasingly challenged to sort through an increasing number of technology choices. They know mistakes are costly.”
Making a ‘Dent’
COCC, a Connecticut-based firm that provides technology-related services to approximately 65 Massachusetts banks, is seeing increases in bank technology expenses.
Joseph Lockwood, chief technology officer at COCC, said there has been a 16 percent increase in Internet services on COCC’s revenue side. Banks, he said, are spending money on services likes Internet firewalls and spam tagging. He is predicting a 50 percent increase for next year as more banks invest in secure e-mail and authentication.
In order to compete with each other, banks are also beginning to offer bill pay with little or no fee attached.
“It is putting a dent in [banks’] technology budgets,” Lockwood said.
According to COCC statistics, there was a 29 percent increase in the amount of home, or Internet, banking traffic over the past year.
There was a 37 percent increase in bill-pay usage.
The ICBA study found that in 2002, 54 percent of community banks had Web sites with Internet banking. The 2004 survey found that 58 percent of all community banks are offering Internet banking services through their Web site, with only 6 percent showing no interest in the technology.
And although the banking industry made it through Y2K with few problems, that infamous year has not been forgotten. Lockwood said because many banks upgraded software and hardware in 1999, they are starting to spend money on new equipment because the old equipment has reached its lifespan.
A more recent change in the banking industry is also creating budgetary concerns. Check 21, which was officially implemented on Oct. 28, has caused banks to change the way they process checks.
Lockwood said banks are also beginning to upgrade from microfilm and move to electronic archives.
Image technology also gained ground, according to ICBA, in 2004. The study found that bankers sought the efficiencies of electronic images vs. paper. Community banks already using check-imaging applications climbed to 65 percent from 53 percent in 2003 and 47 percent in 2002. Another 29 percent of community banks indicated plans to evaluate the technology in the next 12 to 18 months.
Banks, Lockwood said, are also beginning to implement automated solutions to meet regulatory burdens, such as creating reports.
“Productivity does get enhanced when banks buy these systems,” said COCC spokesman Robert Bessel.
Because there are less employees doing “grind” work, such as check processing, bank employees can spend more time in sales or face-to-face with customers, Bessel and Lockwood said.
According to the ICBA survey, banks are interested in staying informed of the latest technology. A majority of community bankers indicated a preference to stay apprised of computer and other vulnerabilities through technology provider Web sites while 18 percent uses the Financial Services Information Sharing & Analysis Center.
The ICBA survey was completed by more than 900 bank executives nationwide.
Jennifer Jope may be reached at jjope@thewarrengroup.com.
