07:44 PM
Jim Eckenrode
Jim Eckenrode

Why Bankers Should Think Like Technologists

Banking at its core is a business that manages and prices risk. But it's also increasingly a technology business, as new competitive and cyber security threats show.

I had the opportunity not long ago to moderate a workshop of payments executives in which we discussed how technology is changing their business. At one point during the discussion, I made the point that because of the influence of technology on their business that they were -- or should be -- becoming technologists themselves. They politely, but forcefully, disagreed. Rather, they felt as though their primary function as bankers was to manage and price risk. A powerful and concise description of the essence of banking, and at its face, I couldn't disagree.

There may be solid reasons for their opinion, not the least of which is that the financial downturn and regulatory attention was heightening their focus on effective risk management. Nevertheless, new business risks and opportunities have begun to emerge that are directly associated with technology use, so much so that the banking industry's future may indeed depend on its ability to fuse the capabilities of a banker with those of a technologist.

As the industry turns its eyes to growth once again, fundamental competitive risks are increasingly technology-based. One only need think of all the tech startups in the peer-to-peer lending, payments, and financial advice space to understand this dynamic. Bankers are casting a wary eye at these innovators, and are perhaps more concerned by the larger technology companies that are increasingly edging their way into the banking business. For them, disruption will be achieved precisely through the development and deployment of more modern technologies that perform bank-like functions that are simple, visually attractive, and truly different.

[Amazon Planning New P2P Payments and Kindle Point of Sale Systems]

Unfortunately, bankers are still trying to free themselves from the burden of their early successes in technology implementation. So many legacy systems are still running -- and running pretty well, given the purposes for which they were developed. Unfortunately, these systems are in many cases not able to support the kind of product innovation required to combat the competitive threat of these new companies. Bankers will need to understand how technology is changing their business, and meet these competitors on the fields that they themselves are defining even as we speak. If they don't, they may run the risk of falling farther behind where the market is going as a result.

The digital banking revolution is also driving new risks into the banking ecosystem. Even as bank customers are taking to these new, innovative technology offerings, cyber criminals -- from bored teenagers and petty thieves to more organized crime rings and nation states -- are also eager to take advantage of these developments. Witness the discussions regarding the Svpeng mobile Trojan that puts mobile devices at risk for malware infection.

These themes were reinforced during a recent financial services cyber security event we hosted in New York. On multiple occasions, the notion that cyberrisks have moved from a mere technology risk to a first-class business risk were noted by speakers from major financial institutions and law enforcement.

Finally, technology-business fusion is not just a discussion of opportunities and risks. It's also important to consider how the technology function could be managed as a business in its own right. There is increasingly a view that the technology platforms and data that are found in banks are themselves assets to manage. CIOs are encouraged to think about the value that these assets provide to the bank, and manage their technology decisions based on a more balanced view of risk and reward for those investments.

So while banking is, at its core, a business that manages and prices risk, the risk to the business of not fusing the mind of a technologist with that of a banker may be one that they would ignore at their peril.

Jim Eckenrode is the Executive Director of the Deloitte Center for Financial Services (DCFS), where he is responsible for defining and guiding the marketplace positioning and development of the Center's eminence and key activities. The DCFS, which supports the firm's U.S. ... View Full Bio

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User Rank: Author
9/29/2014 | 8:51:28 AM
Re: Bankers Need to be Tech Savvy
That's very true, the CIO, and the technology side of the bank more than ever need to be aligned andintegrated to meet the bank's business goals.
Rob CEO,
User Rank: Apprentice
9/27/2014 | 9:47:41 AM
Bankers Need to be Tech Savvy
Great perspective, Jim. When bankers do their annual strategy planning, it needs to be done in collaboration with the CIO and the CTO so the architectural and IT strategy aligns with business goals and vice versa - they need to help drive each other. Some business goals will not be realized without understanding what technology is required to support it, and what IT technology brings to the enterprise, while the IT organization needs to understand the enterprise business strategy and bring in tools that help drive the business goals. Bankers that say they just manage risk and price don't have a 21st century vision of where financial relationship management is heading. They need to understand the new Banking 101 concepts that are changing this world.
User Rank: Strategist
7/17/2014 | 2:16:48 PM
Don't forget this goes both ways?
I have to agree with Jim that bankers need to come across the aisle as there is so much more technology can be doing for them.  With that said, I would also encourage those technologist out there to do the same.  We need to quit going to ONLY technology conferences (we all know it happens all to often as well) and spend a little time at banking conferences or maybe better yet a school.  

Technology itself not the answer. Colaborating on real business problems with bankers assisted by technology is where the magic happens. 
User Rank: Author
7/8/2014 | 9:48:08 PM
IT an asset, not cost center
Jim, your comment toward the end of your column about the need to view IT as an asset that adds value shows how much things have changed in banking (or need to change). There have been many efforts over the years to view IT as a distinct business within the enterprise that could be monetized (selling services and processing capabilities, developing systems that could be marketed to other banks, etc.). At some banks the IT group had to pitch its services to the business units and competed with other vendors. This was progressive thinking at one time -- especially when most banks viewed IT as strictly a cost center. I think what you are describing is a different way of thinking -- it's not about justifying IT investments, it's more about technology being the business and being inherent in the most important products, services and functions. We've been saying "IT is the business" for some time but now it is reality, not aspirational. Thanks for your insights.
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