IT Innovation in Banking — Not Easy to Find

I like all kinds of "beauty contests" announcing the best of class in anything. But mostly because it allows me to play critic. For example, this is me, "They must have been downing too many shots to pick this guy as MVP." Or, "You certainly don't need good looks to be a great singer." Or, "That actor must have a great agent to have been cast for that part." So it was with great interest that I pored over InformationWeek's 22nd Annual Ranking of the most innovative companies. I like IW for its diversity in reporting. After reading the first issue decades ago, I declared it the Time magazine of IT affairs. They used to carry human interest stories, and therefore published one of mine in 2002 about stressed out IT workers. The title was, "Coping With a Bevy of Turmoil, Step by Step." My title was "Have Ya Evah Had Your Kneecap Licked By A Dog?" I don't know what it was about 2002, but even the ABA Banking Journal interviewed me about "Easing Technology's Stress Points." Compared to now, 2002-style stress was a walk in the park.

Take a trip with me now as I comment on the 500 top innovators.

First, I was surprised there were only 12 banks on the list — First Horizon, PNC, Fifth Third, Wells Fargo, BNY Mellon, Capital One, Rabobank, State Street, Northern Trust, Discover, Regions and Synovus.

As a simple comparison to other industries, insurance had 37 companies listed.

All the airlines were listed, probably for their ability to find add-on fees based on real-time passenger profiling.

Clearly, this exercise dealt with giant institutions. The smallest of the winners was First Horizon, the 46th largest U.S. bank. Does that mean small and medium size banks (15,514 of them) are not innovators? Please don't tell them that.

It looked like the same banks made it the year before, except that two on last year's were dropped — Whitney National Bank and Chase. What did they do or not do? The new one this year is RaboBank, the international ag bank cooperative.

I appreciate what is, but I also like to know what isn't. For example, where were Bank of America, Chase and Citi? Do they not innovate? Big by itself doesn't mean smart as we have seen in the past three years, but does big spending equal innovation? These guys spend $10 billion per year on IT. Is there no room for innovation in big spending?

Unfortunately, the list doesn't explain what it was about these banks that ranked them high on the list of innovations. Last week, Chase might have said innovation is keeping our online banking up.

Since the list included tech companies as well, it was clear to me why FIS and Fiserv made it. What wasn't clear is why Jack Henry did not make it. Under the heading of innovation, all three companies and more would win my award.

Taking it a step further, I might call all 82 companies in Automation in Banking - 2010 innovators. It's their job to create; it's the bank's job to implement. So as tech vendors go, so go their customers.

Speaking of vendors, I wondered why FIS made the list, but M&I Bank didn't. Since M&I Bank relies 100% on the Metavante solutions now offered by FIS, there seems to be a disconnect in logic there.

Coincidentally, as I was crafting this blog, Forbes magazine published an article about technology and Wells Fargo. I was impressed with Ms. Modjtabai's (CIO of Wells Fargo) modesty that it's a combination of things, not just technology. Wells Fargo has been recognized for its innovations, especially since the Internet and banking came together. If I read the Forbes article correctly, this is how Ms. Modjtabai represented innovation at Wells Fargo.

Technology is only one piece of what makes a bank successful. It's the business model, the culture, the team and the technology.

Technology was always important, not just since the widespread adoption of the Internet in the mid-1990s.

Security has always been a priority, and we have multiple layers of security. The customers play a big part too. We do a lot of work educating our customers.

The CIO does not have a pure technology background. The team is strong in technology, but the CIO brings more of a business focus, a focus on the end customer, and partnering to reach that end customer.

Our business partners are internal, but we also have strong partnerships with external companies.

There are a number of internal efforts going on to understand the customer and make sure we know them. Having a single view of the customer is always a priority for us.

In response to what exactly is on the IT road map, the CIO placed the integration of Wells Fargo and Wachovia as the #1 priority. Others included moving from paper to electronic, real-time reporting of customer data, improving delivery of products and services, expanding capabilities around mobile banking, consolidating data centers, and upgrading networks.

After reading Ms. Modjtabai's comments about IT at Wells Fargo, I would say that making the honor roll on any account depends a whole lot on managing successfully every aspect of technology. That's innovation.