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Art Gillis
Art Gillis
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75% of Bank Technology is of the Plug-in-and-Run Kind, 25% Makes it All Worthwhile

Analytic apps can tell the executive suite how gazillions of transactions are affecting the security and safety of their bank.

Of the 184 pieces of technology (applications) that every bank and credit union uses, most of it is of the transaction processing variety. If you go back to day one of bank automation (early fifties), a basic course in computer science always included this question: Name the three parts of a computer. Answer: Input, processing unit and output. That's what 138 bank applications do every day at 15,100 financial institutions. When the last transaction is processed, everyone in operations goes home or to Starbucks, feeling good about themselves because nothing was aborted (to the naked eye). The guys in the executive suite shouldn't feel good about anything because they have no idea how gazillions of transactions have affected the security and safety of their bank.

This blog is about the two types of bank technology. 1) Mechanical applications that never caused a bank to fail. Just ask FDIC chairman Sheila Bair. 2) Analytical applications that might have saved some of the 1,204 troubled and failed banks in recent years. "Might have" is key to what I have to say here because even the best analytical applications cannot protect every bank from harm. Bankers have to understand them, use them, and act on them. The difference between mechanical and analytical applications is this -- every bank must run the mechanical stuff every day. Analytical stuff is discretionary, and as it relates to a banker, discretionary means, "Would I rather play golf this Wednesday afternoon, or sit by my workstation examining tons of spreadsheets, elusive data relationships, and nasty warnings about my beloved customers?"

For the most part, bank regulators never check to see if bankers are using their analytical applications. That's why I'm proposing that bank tech vendors take on the job. The evaluation process begins when a vendor rep approaches his/her customers with this introduction, "Good morning, I'm not with the government, but I'm here to help you. And help means I might sell you something." The 25% of the tech pie includes security, fraud prevention, anti money laundering, compliance, business intelligence, risk management, asset/liability management, profitability analysis, loan administration, and credit quality.

While vendors enjoy using the 99% euphemism relating to their up-time and sometimes customer satisfaction surveys, now is their chance to report a real metric about their customers, such as 60% deficient. "You've failed the test of analytical tools usage, and we've got a lot of work to do. How fast can you assemble your recovery team so we can get started?" When bank tech vendors drop their politically correct language with customers and begin the brutal task of promoting the value of analytical applications, then I believe the world can begin to believe that financial reform is at least a possibility. Until then, worrying about credit card and debit card fees, and charging piddling $3 per month check imaging fees instead of preventing huge commercial loan losses, mortgage exposures, and bailout acquisitions gone sour is like worrying about an ingrown nail vs. a brain tumor. Banks now need to appreciate the analytical value of technology, not the transaction moving value. It's the difference between a Google and a Fedex. Can you handle that?

Clarification: Application means a collection of programs designed to address one function performed by a bank. For example, Demand Deposit Accounting (one of the 184), consists of programs that wrap up the day's transactions and provides bookkeeping and status reports for the next day's business. The very popular DDA application called Fiserv Premier consists of five computer programs. If you are a business analyst, focus on the 184. If you're a programmer, you've got a job for life.

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