Friday, April 22, 2011

Eight Tracks, The Dead, Banking, and Technology

As I sit here listening to a streaming audio of the soundboard recording of a Grateful Dead concert I attended in high school, it reminds me of how much technology has changed since then. I first heard the song "Mexicali Blues" on my Eight Track Player in my room. Remember those things? Eventually, if you played the tape enough (which I usually did), you'd start hearing other tracks bleeding into the song you were listening to. Pretty lousy technology, in retrospect.

Okay, so what does that have in common with banking? I've just spent twelve days over the last four weeks with a team of folks looking at bank technology vendors. So technology and the progress we've made as an industry is front and center. While we've made tremendous strides since our bank last looked at a new core provider over 11 years ago, we are still living with many systems that were built during the height of the Eight Track era. Now it isn't only the core data that's critical (just like the music), it's how it is delivered to the end customer (streaming on demand versus an Eight Track Cassette).

I think I like the current "on demand" era better, but it sure does make it a more difficult decision. Frankly, we have to evaluate our partners even more closely to see if they are thinking about the next, new thing that will replace the current channels. Because the technology today, like the Eight Track Cassette, may not be the long term solution tomorrow.

Friday, April 15, 2011

Customers demand more real time banking, Banks face more risks

As our organization looks at a new core banking solution, it's more and more apparent that the days of stand alone solutions are over. From the beginning, when we started with self service channels like ATM's and Telephone Banking, to the current mobile banking offerings, the landscape has changed forever. We've gone from providing customers with monthly data (paper statements), to day old information (online banking) to instantaneous capture of a debit transaction so it's available through any channel, including mobile. We can even proactively alert you when something happens on your account.

The difficulty this presents, as any bank technology guy will tell you, is that we are living in a real time world when our core systems are still built for a one time, batch processing environment. Customers, for example, no longer accept that deposits can only be credited to their account before two every afternoon. So the systems that support the banks, whether in-house or outsourced, have to adapt to this new paradigm. It's one of the reasons we are looking at other solutions (besides the fact that our current provider is sunsetting our core).

As we move to a more real time environment, we also open ourselves up to more transactional risk and fraud. Evaluating these risks in real time will be challenging and lead to even more automated systems to identify these individual items. It will prove to be a major challenge for banks over the next few years.