Along with revitalized spending power, bank IT executives will have to deliver on technology initiatives with measurable improvements in revenue growth, customer retention and compliance. So placing the right bets on key technologies that truly can transform the business will be more important than ever. Here are BS&T's predictions of the hot technologies that will be banking game-changers in the year ahead.
1. The Mobile Banking Revolution Has Begun
Smartphone adoption in the United States has gone mainstream. According to a fall forecast from IDC, 269.6 million mobile devices shipped in 2010 -- a 55 percent increase over 2009. What does this mean for banks? Easy: More opportunity to put sophisticated banking services in the palms of customers' hands, 24 hours a day, 365 days a year.
Throughout 2010 consumers were assaulted with new handheld devices running Google's Android operating system, Research in Motion's BlackBerry OS and Apple's latest iOS iPhone platform. Adding to the mobile eruption was the advent of the tablet computer, led by Apple's iPad, Samsung's Galaxy Tab and RIM's PlayBook.
"Mobile obviously is top of mind for everyone," says BS&T Reader Advisory Board member John Itokazu, EVP and CIO of Salt Lake City-based Zions Bancorporation. "I'm interested in watching what happens in mobile as it relates to all mobile devices."
Surely the bevy of available devices and the skyrocketing rate of adoption are significant factors in the consumer mobile revolution. Ultimately, however, for banks to leverage the mobile channel to attract and retain customers, they have to provide mobile services and downloadable apps that provide value and encourage adoption.
One area where banks can provide that value, which is key to mobile banking adoption, according to Gartner, is remote deposit capture. In its October report, "U.S. Banking Customers Increasingly Use Online, Mobile Services to Deposit Paper Checks," Gartner identifies RDC as a possible driver to mobile banking adoption. Currently, USAA, Chase and State Farm Bank are among several institutions that have deployed mobile remote deposit capture apps for the iOS and Android platforms. --Matt Gunn
2. Large Banks Explore Hybrid Clouds
Large banks' private clouds -- in which cloud virtues such as virtualization, shared resources and on-demand deployment are brought to bear in an internal IT environment -- will grow larger, and their experiments with public and hybrid clouds will increase, predicts Adrian Kunzle, managing director, head of engineering and architecture, at New York-based JPMorgan Chase. "I don't think banks can ignore cloud computing," he says, while acknowledging that some banking applications, such as those that require high performance, may never be suitable for a cloud implementation.
"You'll see increased attention to private clouds, and you'll see people get their feet wet in hybrids in 2011, where they connect their private cloud to a public cloud," adds Kunzle.
Research supports Kunzle's predictions. A recent IDG survey revealed that 75 percent of companies will use enterprise-class cloud computing solutions within five years. Asked what benefits they perceive in cloud computing, 78 percent of the 172 CTOs, CIOs and IT global managers surveyed by IDG selected "pay only for what you use" and "easy/fast to deploy to end-users." Three-quarters of respondents chose "monthly payments," 69 percent selected "encourages standard systems" and 67 percent said "requires less in-house IT staff, costs."
In Bank Systems & Technology's cloud computing survey this year, 19 percent of banker respondents said they are developing or using a private cloud. Public clouds have been slower to catch on among BS&T's readership: 16 percent of respondents said they are receiving services from an external cloud provider today, and 28 percent said they are considering using the services of an external cloud provider.
Bankers' security concerns about cloud computing (i.e., the need to protect data) are being resolved, according to Kunzle, who is on the steering committee of a promising new user group, the Open Data Center Alliance, that is creating road maps for vendors in the data center, private cloud and public cloud spaces. --Penny Crosman
3. The Automated Branch
Whether it's what the customer sees or what's going on behind the scenes, bank branches are becoming smarter, friendlier and more automated going into 2011. While check writing is on the decline and more and more customers turn to the online and mobile channels, the shift toward smarter, more efficient branches that emphasize choice and seamless service is born of the necessity to lower costs, boost efficiency and improve sales.
To that end, Celent projected back in January 2010 that the industry would be at the bottom of a dip in retail branch IT investments, with some recovery expected to begin in 2011, although the more obvious recent shift has been toward self-service. Two of the North American banks that are embracing the retail store concept in developing their branches are Portland, Ore.-based Umpqua Bank and Montreal-based Royal Bank of Canada. RBC, in particular, is integrating self-service capabilities into its branch locations.
An example of a bank improving its branch efficiencies through better behind-the-counter processing capabilities, Zions Bancorporation, a holding company for eight banks in the west and southwest United States with combined assets of $51.6 billion, has been aggressively adopting check imaging and branch capture. While two of its banks are 100 percent on branch capture as of 2010, Zions EVP and CIO John Itokazu expects the rest of the company's banks to have converted by the end of 2011. "It will force us to rethink how we do the work in the branch," he explains. --M.G.
4. Getting Serious About Social Media
Although 60 percent of bankers who responded to an Aite Group survey in October 2010 described themselves as social media "novices" or "beginners," that will change in 2011; Aite analysts say 90 percent of banks will have a dedicated social media budget by 2012.
Dan Marks, chief marketing officer at First Tennessee (Memphis) and a banking industry social media pioneer, believes 2011 will be the year most banks get involved in social media. "2010 was the year of unmistakable awareness" of social media, and 40 percent of banks are actively involved, he contends. "Next year, folks who started early will be taking this to the next level, and banks that aren't yet participating will finally realize they have to."
In fact, all banks are already involved in social media, Marks adds -- whether they realize it or not -- because customers are talking about them on blogs, Facebook and Twitter, even if the banks are not active in those venues. "If banks are going to be part of the conversation, they need to be active in social media," Marks stresses.
Among other emerging social media trends, monitoring and analytic tools from companies such as Radian6 and Nielson are getting better and are including integration options to help a company understand what customers are saying across different social media channels, Marks observes. Next year his bank will deploy tools that create maps between customers' social media activity and increased website traffic and product purchases, he adds.
Marks says he also is starting to see content management platforms for social media emerge. "The proliferation of channels gives the social marketer the opportunity to manage content across Facebook, YouTube, Twitter, Foursquare and other social media networks, and coordinate and plan content distribution across those channels," he says.
Security and compliance will remain a concern, Marks acknowledges. "There's no doubt regulators are looking at it, and FINRA has come out with a strong stance on social media," he comments. Banks will need to educate employees and customers about privacy and security best practices. --P.C.
5. Balancing Business Gain With Added Risk
Credit, market and liquidity risk all will be concerns for banks as they grapple with the requirements of the Dodd-Frank financial reform legislation and Basel III. The most universal risk worry for banks large and small will be credit risk. Regulators will want to see banks free up credit, yet keep credit standards high.
"Credit risk will continue to be a big focus, not just on the mortgage side, but across consumer lending," says Michael Versace, research director, global risk management, at IDC Financial Insights (Framingham, Mass.). As a result, banks will need to obtain more and better data to make credit decisions and to create analytics based on that data.
"Everybody is watching Basel III," adds John Filby, president of risk and compliance solutions at Fiserv (Brookfield, Wis.). "We're hearing concern about a spillover effect to the whole market," he says, noting that small-bank customers are concerned about how far down the rules will reach. One technology angle here is the risk models that banks use to determine capital ratios; proprietary models likely will save banks money versus the standardized approach.
Many banks are working to create an enterprisewide view of risk with reports and dashboards that show credit, counterparty and trade risk across the board. "A lot of banks say they're still looking for that holy grail, which is a golden source of truth," relates Fred Kim, a senior manager at Accenture. "They're still pursuing that, spending an enormous amount of time gathering and aggregating their data. They also have struggles because the data in large bank systems is still very fragmented. ... They're trying to simplify and consolidate the data infrastructure and make sure it is in sync with the general ledger." These are very long-term projects that will be advanced -- but probably not completed -- in 2011. --P.C.