January 03, 2012

For the past several years, bank IT budgets generally remained flat. The financial crisis and ensuing fallout forced belt-tightening across the industry. In 2011, however, bank IT executives finally enjoyed some breathing room thanks to some revitalized spending power.

And in 2012, bank technology budgets should continue to increase, if ever so slightly. But with the economic recovery still on shaky legs, and with regulatory scrutiny more intense than ever, banks' IT investments are likely to be focused largely on driving efficiencies and complying with new requirements. Bank Systems & Technology identifies the IT trends and hot technologies that will change the game in the year ahead.

1. Convergence of Mobile and Online Technologies

Mobile banking started as a novelty, something only techies and first adopters felt comfortable using. But as smartphones have skyrocketed in popularity over the past few years, mobile banking adoption has increased along with it.

Initially, many banks' mobile offerings consisted of their online banking model ported to an iPhone or Android device. As mobile has grown into a maturing channel, however, banks and their vendor partners have produced richer mobile offerings that take advantage of its unique capabilities. And the rise of the tablet gives financial institutions another unique interface through which to interact with consumers (see No. 4).

"Mobile banking, when it first became a hot topic, was very much an offshoot of the online channel," says Jacob Jegher, senior analyst with Boston-based Celent. "Now mobile is maturing to the point where it is its own unique beast."

While banks are embracing the mobile channel -- and continuing to support the old standby of online banking -- they are not integrating the technologies used to build e-banking solutions, according to Jegher. But that will begin to change in 2012. "We'll see banks continue to develop solutions for these multiple channels but using a single set of technology to do so," he predicts. A cohesive set of technologies, Jegher adds, will make mobile app and online development easier for banks to manage.

Jegher points to several high-profile acquisitions, such as Brookfield, Wis.-based core banking software provider Fiserv's March 2011 acquisition of mobile banking and payments software provider Mobile Commerce (M-Com; Atlanta), as signs that the industry is moving in this direction. "The reason behind these kinds of acquisitions is because [vendors] need these tech assets that will allow them to serve their customers," he explains.

As banks continue to search for efficiencies and consolidate operations, the convergence of mobile and online technologies looks to be a prime opportunity to do so in 2012.

2. The Rise of Business Process Management

Both to increase efficiency and ensure regulatory compliance, banks need better methods of gathering and reporting data. Most banks struggle with multiple back-office systems and siloed information. To address these issues in earnest, there will be a large investment in new and improved business process management tools in the year ahead, experts say.

Especially as banks wrangle with how best to harness Big Data and the technical challenges of analyzing and reporting very large amounts of information with a quick turnaround, they will need to invest in BPM tools that facilitate integration, says David Hamilton, president of the banking business at SunGard (New York). "Many banks still wrestle with multiple back-office systems," he says. "They have to master customer data management, and I think there is a fairly considerable investment to be made in getting the basics right."

In addition, integrated data systems will help with risk management, Hamilton notes. "There's a need for good-quality risk data," he says.

Data integration also will help banks obtain a more accurate view of their customers, Hamilton adds. Marketers often talk about breaking through data silos to look at data holistically and gain a more complete view of consumers' habits, and now banks will look to do the same, he says. "These big trends, and the move for strategic cost reduction, map very clearly to bigger BPM investment," he insists.

3. Goodbye Email, Hello Message Center

The abandonment of email for anything sensitive already has begun, and the shift to total reliance on message centers -- dedicated web portals designed for secure communication between a bank and its customers -- looks to be here to stay. While organizations that have message centers today still use them inconsistently, says Aaron Higbee, CTO of PhishMe, a Chantilly, Va.-based company that specializes in antiphishing training and education, they increasingly will become the norm for communicating with customers, rather than email.

The move to message centers will be beneficial on several fronts, according to Higbee. Many organizations currently employ third-party and joint marketing campaigns that have made unified messaging difficult, he explains. They also continue to send emails with the actual messages in the body of the email or include cryptic links. These practices make it difficult for end users to differentiate between a legitimate email and a phishing email, so they will have to change, Higbee contends.

He adds that many bank employees believe only consumers are targeted by phishing scams; many are unaware that they themselves are targeted by attackers trying to compromise the organization, and they may be unprepared to recognize truly targeted phishing attacks from advanced attackers. This is in line with a November report issued by Ernst & Young that found employees within organizations and businesses are increasingly the targets of hackers rather than individual consumers.

4. The 'Tabletization' of Banking and the User Experience

Tablet banking is still a young channel, but it is rife with potential. As with initial mobile forays, it may take banks some period of trial and error to determine how to build the best banking experience for the tablet environment. But most experts agree that the potential for a great tablet banking user experience, especially with the rich interface tablets offer, is nearly unlimited.

In fact, Celent's Jegher believes that as banks realize the opportunity that the tablet format offers, they will begin to redesign their online banking experience to be more like their tablet banking offerings. "The current state of tablet banking, being very immature, you usually take what you have online and just put it into the tablet banking app," he notes. "But what if you thought about it the other way around? The tablet offers the richest interface out there. What if online became influenced by tablet banking? The functionality of online banking is very mature, but the user experience is immature."

Customers now expect a customizable, personalized experience on their terms, Jegher says. The "tabletization" of online banking and the advent of cutting-edge mobile technologies, such as mobile remote deposit capture, speak to the evolving bank user exeprience, he comments, adding, "This user experience trend is becoming more mainstream."