Smarter use of analytics, systems modifications for compliance and regulation, and finding new revenue opportunities to counter shrinking profits are among what TowerGroup considers the top technology initiatives for banks this year.
The Needham, Mass.-based research and advisory firm identified 10 areas where banks will be focusing their IT efforts, many of which come as the consequence of new regulations, changing consumer behavior and the need to reinvent a broken profitability model. While some trends in TowerGroup's report, "Retail Banking & Delivery Channels: Top 10 Technology Initiatives for 2011" appear to be in reaction to new and still-forming regulation, other initiatives are in response to changing customer behavior. But whatever direction banks are going, the key message is that they seek to streamline operations while recapturing revenue.
"Banks need to operate more efficiently," says Robert Hunt, TowerGroup senior research director, Retail Banking. "And part of this is in reaction to the lost revenues."
TowerGroup's top 10 list includes:
Many of the initiatives identified by TowerGroup feed each other. Meeting compliance and regulatory demands, for example, could trigger investment in systems modernization. The cost of new systems and the loss of revenue as the result of new regulation could be offset by smarter use of analytics.
"The analytics area seems to be one of the most helpful in figuring out in how you make more revenue," says TowerGroup research director Nicole Sturgill.
And while analytics technology is getting better, it isn't an end in itself, Sturgill adds. Banks need to intelligently use the data they gather, pull information from multiple sources and use it in a meaningful way.
"I think what you’re seeing is banks coming out with new packages and products and new pricing, much of that what they’ve learned from through analytics," Hunt includes.
It's also leads to identifying customer groups and their relationship with the bank, offering the right products and services to the right people and identifying the profitable customer relationships. Analytics also show who is interacting with which channels, and could provide insight as to how to incorporate channels, promote them and even transform the branch.
And, while learning how to better service customers through each channel, banks also seek to restructure how they manage those channels.
"There are trends within each individual channel, but I think the biggest thing within the last six months has been 'how do I support multiple channels,'" Sturgill says.
She believes the key is in a business model change that would better unify each channel as parts of a whole, rather than continue to develop channels independently of each other.
"They have to work together," Sturgill adds. "We have to manage them copmrehensively because customers use them comprehensively."
If a bank's mobile budget is separate from its online budget, then those channels will be looked at separately and addressed as separate things "The technology is there to pull these channels together and manage them together," Sturgill says.
But where is the biggest focus among banks?
"It has to be compliance because you don’t have much of a choice," Hunt says. "There’s just no alternative. Once you set that aside you can turn to two things: product and pricing."