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What kinds of “portable” skills do out-of-work bankers and Wall Street traders bring to the marketplace?

Not many – except maybe partying ability, according to the writers of NBC’s 30 Rock. A story line in last night’s (February 5) episode involves the hiring of a bunch of former Lehman Brothers traders – basically out of pity, since, according to network executive Jack Donaghy (the character played by Alex Baldwin), they basically don’t know how to do anything. Watch the episode (and I guess at the same time be thankful that you have IT proficiency):

Anybody who has read any of my material before may recall that I’ve been a bit skeptical about the use of Web 2.0 technologies in banking. To me, that’s something relegated to “cool” retailers intent on courting the Millennial crowd (I still kind of roll my eyes when I hear about yet another YouTube contest offered by a merchant of some sort). But the more I listen to bankers in the know about Web 2.0, the more I’m beginning to understand what it is that this can do for financial institutions.

For instance, the opening session at this year’s BS&T Executive Summit was on the topic of Web 2.0. Both presenters were from large financial institutions that have been dabbling in this area: Anita Sands, managing director and head of transformation management with Citi and Margaret Weichert, e-commerce/ATM business development and planning executive with Bank of America. What I took away from the presentation is that banks just can’t do this for the sake of wanting to be perceived as “with it.” Rather, they must have a clear idea of what it is Web 2.0 will do for the institution and its customers.

“Trust levels are changing,” said Sands. “What does it mean to a bank when its customers turn to other customers for advice?” (Think of the wikis and blogs out there offering financial advice)

Weichert similarly stated, “Who people trusted used to be an institution with big pillars. Now it’s their friends and families.”

As tough a time it is to be a banker, how banks touch their customers will become even more vital, said Weichert. She noted that customers have been contacting Bank of America at three-to-four times the normal level over the past couple of weeks. They are also doing so via multiple channels.

Customers want it all now, especially the up and coming generation of digital natives. Both speakers emphasized what a different animal these people will be from any other customer demographic and that banks will need to understand how to reach them. “Users expect a different experience now,” said Weichert. “[Gen Y] is used to being heard.”

But Citi’s Sands emphasized that Web 2.0 has less to do with technology and tools as it does with content. It’s about creating content and creating connections that are meaningful to the users.

How a bank will accomplish this is still up for debate, but Weichert offered a good starting point. First, banks need to approach 2.0 as something that is open. She spoke about creating open, more democratic and interconnected contribution models, where the customers can customize their own banking experiences. Don’t limit their access to resources either. If they want to aggregate information from all their accounts at any financial institution, the primary bank shouldn’t balk at this, she noted. This is something BofA already offers in its portfolio management tools, she added.

Sands also pointed out that Web 2.0 isn’t just a customer-facing concept but something that can be used internally as well. While she was at Royal Bank of Canada, Sands said the bank used Web 2.0 in some of its recruiting efforts. “The nature of work is changing,” she said. “Knowledge work is increasing and the rest of it will be outsourced.”

So with Web 2.0, the bank should look to answer two questions, explained Sands: who knows who and who knows what? “What do people know and how can we harness that intelligence? Where do the skills reside in the organization?” she posed to the Summit attendees.

Whether internally or externally, Sands said banks should look to create communities. However, these communities can’t just be built and left to their own devices. They must be cultivated, she stated. “It’s not a free-for-all. There are hierarchies but they are based on who has the most knowledge. It’s meritocratic. People will participate in communities to the degree to which it benefits them.”

Whether banks like it or not, in the end, BofA’s Weichert said this is going to become a reality for the industry. “This just going to happen one way or the other,” she noted. “We don’t need to be cute. It’s not about cuteness or flash. Web 2.0 means being connected to customers at all times.”

Demographics is destiny, and in this article, my colleague Marianne Kolbasuk McGee from InformationWeek lays out the undeniable facts: we're all getting older.

I believe that those of us in the information technology business tend to have a keener sense of our own mortality. We're constantly dealing with "end-of-life" software and hardware. We struggle to support legacy systems that creak along until they're put to pasture, replaced by the latest and greatest tools that are no sooner installed than they become legacy systems in their own right. We watch as our once-proud hardware runs out of memory and struggles to perform the most basic tasks. And we also conceive of new systems, nurture them along until they're sustainable, and send them out into the world to earn a living.

With the retirement of the Baby Boomers, the first generation to manage the integration of global business and information technology will no longer act as caretakers to the national IT infrastructure. Instead, they'll be booking times at the local golf course. This poses an unique challenge for financial services organizations that depend upon these people, not just because they possess a certain skill set, but because they share -- and helped to define -- the industry's goals and values.

Fortunately, there are ways that the older generation can transmit knowledge to the younger generation, and Bank Systems & Technology can be part of that process. Specifically, what are all the retired bankers going to do after they're done gardening and golfing? They're going to surf the Web, and they're going to want to hold forth on whatever they know, to whomever will listen. And we're here to provide that forum.

Personally, in my role as commentator on banking technology, I see retirees as my number one competitive threat. Let's face it: I have a good command of the English language, I'm fairly prolific and I understand how the financial system works, but I've never worked for a bank and my hands-on tech experience has been limited to helping run a medium-size business, not a megabank. Soon, people in my position will be competing for bylines with a bunch of bored pensioners having 40 years of experience at big banks.

It's time for me to move along and make room for the "next generation."

This has been my last month on the editorial staff of Bank Systems & Technology. I have accepted a position as Technical Analyst with BS&T's parent company, CMP Media, acting as a liaison between the business users and the IT group. This is a chance to apply the lessons I've learned from writing about financial services: finding efficiencies in manufacturing, creating multi-channel distribution, implementing know-your-customer practices throughout the organization, and achieving competitive advantage through the successful management of technology.

I've learned from the best. Thank you.

Check out my special News Show preview of Firewall: The Movie, which is Hollywood's take on what you do for a living.

Since September 2005, the three major consumer credit reporting agencies have been required to provide upon request free annual credit reports. So, to see what the agencies have on record, I sent many of my personally-identifying characteristics through a secure Internet connection in exchange for comprehensive reports from Equifax, Experian and TransUnion.

After giving up my name, Social Security number, date of birth and last two addresses, I was then invited to each of the three reporting agencies' sites, one at a time.

The first time, I was challenged to answer a question about my current financial picture, i.e."To which bank do you write a loan check every month?" and "How much is the monthly payment?" Those answers I know quite well. With that, I gained admittance to the first agency's site, where I was able to download a rather comprehensive picture of my financial history.

At the second identity challenge, I was asked the street number of a prior address. Between various jobs, schools and internships, I've lived at almost a dozen addresses - some for just a few months - and I'm supposed to remember the street numbers for each one? I had already given that part of my brain over to the mixture for a mint julep.

Fortunately, I had a cheat sheet. I merely checked the report from the first provider to supply answers for the other two providers. And to be honest, I needed the help. But the process did leave a nagging sense of vulnerability, in that the personal data required to obtain a full dossier on someone seems insufficient compared to the prize.

And what a prize! The heavyweight Equifax report clocked in at 28 pages, dwarfing Experian's 16 pages and TransUnion's lightweight seven-page report. Laden with data, I can't say that any of them were particularly shining examples of information design, but you get what you pay for.

I can now be reasonably certain that my identity has not yet been stolen. But in ascertaining that, I now have over 50 pages of sensitive data which someone could use against me. Time to feed the shredder.

Back in business school, on my first day of the required Marketing class, the professor put a slide up on the board that said something to the effect of: "More of today's CEOs have risen to the top through the marketing function than from any other area of business."

Of course, hyping one's own field of interest is something you'd certanly expect a marketing professor to do. Nevertheless, the slide made an impression. Was there something about Marketing, compared to Finance, Operations or anything else, that generates leaders?

Or is there some other explanation?

In the late 90s, the generation of business leaders at the top of the heap may have come through the marketing channel because, quite simply, marketing was where the action was. The rise of national media, global brands and mass-market advertising needed people who could navigate the shift between local businesses and national businesses. Thus, the shifting landscape provided an evolutionary advantage to the marketing wizards.

But will the business leaders of 2020 have similar marketing backgrounds? Perhaps not. While it is true that figuring out how to market through these channels is no less important than it was before, this time, we're moving from mass-market channels to Internet-mediated channels. Today's market calls for mass customization. That requires a knowledge of not just how to appeal to customers, but also how to wring the efficiencies out of operations, how to balance budget and financial priorities, how to manage the pounding waves of innovation, and how to motivate talented people.

In short, it's the CIOs who, through their tireless efforts to serve their organizations with technology, are grooming themselves to be the next generation of business leaders.

In this month's special edition of BS&T, Senior Editor Maria Bruno-Britz spoke to several Innovative CIOs:

- Jean Davis from Wachovia, who started out as a corporate relationship manager at her bank;

- Webb Edwards from Wells Fargo, who describes the way that business interacts with IT in his organization.;

- Timothy Theriault from Northern Trust, who has built an IT department where he can put his technology people in front of clients;

- Greg Bixby from Republic Bancorp, who instituted a "Keep It Simple" strategy at his bank;

- Pravir Vohra from ICICI Bank, who's bringing low-cost banking across India and around the globe; and

- Kent Seinfeld from Commerce Bank, who's sourcing applications that support his organization's leadership drive.

Don't be surprised if these names pop up higher on the org chart one of these days.

This week's newsletter has a story on Wachovia's implementation of remote deposit capture (RDC).

In it, we revisit the debate over whether RDC is best done using thick-client or a thin-client software. Given the obvious benefits of the software and the competitive need for it, what's your take on the relative merits of the two approaches? Or does it matter?

Please leave your comments on this blog entry.

Just finished the CIO issue. Hope all of you enjoy it.

Earlier this week, I attended the Global Grid Forum.

From The News Show, here's part one and part two of my interview with the Chairman of GGF, Mark Linesch.

I also attended a session concerning Bank of America's grid implementation.

Yesterday's webcast on the implications of the release of data under the Home Mortgage Disclosure Act ("HMDA") was quite a success.

Although the intent of HMDA was to provide transparency on lending practices, perhaps its most significant effect will stem from the ability for mortgage lenders to use this as a new source of competitive data on 8,853 financial institutions. The data includes information on loan pricing and the type of loan (e.g. loans for manufactured housing, loans secured by first or subordinate liens, unsecured loans). If you're considering an acquisition, HMDA may prove to be an interesting source of due diligence data.

It seems that the only place where the data won't really have a definitive impact is in assessing whether a lender discriminates. In its Sept. 27 Financial Services Alert, Goodwin Proctor LLP writes:

The FFIEC emphasized in its press release that the HMDA data are not, by themselves, a basis for definitive conclusions regarding whther a lender discriminates unlawfully against particular borrowers or takes unfair advantage of them.

...

As a result, the FFIEC cautioned that conclusions from the HMDA data alone run the risk of being unsound, which in turn may reduce the data's effectiveness in promoting HMDA's objectives.

Write to me at ischneider@cmp.com if you have any additional perspectives on this topic.

Oh yes, and do watch the webcast:
Behind the Data: What Every Bank Should Know About HMDA.

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