With new financial regulatory legislation bearing down on financial institutions, pressure on profits has taken hold. Whether it is limits on interchange fee income pending in the Durbin Amendment, or opt-in regulations for overdraft coverage, many institutions are looking for ways to replace what have been historically consistent, dependable revenue streams.
A recent opinion article by two Novarica analysts published by Bank Systems & Technology -- "U.S. Banking Industry Trends and IT Impacts" -- highlights the revenue challenges facing institutions and offers a variety of steps banks should take to improve their profitability through several IT initiatives. Certainly, the authors identify several valid profitability-driven strategies. However, I would add a cost-reducing strategy to their list: outsourced records management and digital storage.
In my discussions with banking IT executives, the one consistent topic is reducing costs. While keenly aware of the ballooning costs to manage and store ever-increasing data on proprietary systems, many executives have yet to address this problem directly.
Neglecting to tackle this issue is a missed opportunity, because reducing costs is only one of the major benefits of outsourcing data. An outsourced solution can help improve overall operational efficiency by allowing institutions to scale their storage usage to the appropriate level and eliminate redundant or unnecessary systems. Moreover, financial institutions could be better equipped to manage the increased demands on data stemming from the new regulations. New regulations governing increased transparency will require banks to prioritize, manage, store and retrieve their data for ad-hoc regulatory requests or e-discovery demands.
As the authors of "U.S. Banking Industry Trends and IT Impacts" wisely point out, banks face strong "revenue headwinds on the horizon." There is not just one solution or quick fix. In addition to finding ways to replace lost revenue, banks will need to focus on reducing operational costs. Now is the perfect time for banking IT executives to take a hard look at their current records management and storage systems and consider an outsourced, scalable solution.
Rich Walsh is President, Document Archive and Repository Services at Viewpointe. He has more than 25 years of operational information technology experience.