Lookin' For Growth in All the Wrong Places

Last week I covered the subject of diminishing growth among the top six bank tech vendors, based on the banking crunch and the weaknesses of the economy. This week I see a long term problem for bank tech companies and that is an absence of new technologies. Because my definition of "new" may not match that of others, I want to include my five-year buffer period. If it was introduced within the past five years, I call it new because bankers are very slow in gearing up to adopt new technologies. We're not talking Apple's iPad here. The current list of "new" technologies includes products and solutions that are at least eight years old, so when I say bank tech vendors have nothing new to sell, it addresses the problem of how these companies will grow their revenues as banks begin to recover from the banking crunch.I feel a little like Johnny Lee even though I have never set foot in a singles bar and love is not my number one priority. My search has been in more business-like places, including the following:

Any Financial Institution If I use 1967 as the basis for how technology will respond to the aspirations of forward-thinking bankers, I relate to an assignment when I was a plebe consultant at Booz, Allen & Hamilton, working for our client to build the "Anything Card" for John Reed at First National City Bank of New York (now Citi.) Forty-four years later, there isn't a banker in the world who would have to hire any systems developer to create a system to do any of 132 banking functions that technology serves. It's not that innovative bankers lost their creativity, it's more like bank tech vendors are ahead of the game with a product/solution for even the new generation of John Reeds. Every financial institution seems to have what they want either because they already bought it, or they earmarked it for implementation in a distant quarter, or they don't need it. The bank tech space is in mature mode, and bankers love it because they're not in any mood to spend precious capital.

Any Bank Tech Vendor New creations of IT products are like makeovers of the old to give the appearance of new. Bankers don't rush to market to buy makeovers. This is especially true as the maintenance departments of bank tech vendors have been sending out at least three releases per year to keep the old fogies lookin' new. I should be on the receiving end of that kind of magic. While bank tech vendors earned kudos for supporting their "original" systems for life, they depleted their sales departments of replacements to sell. Think of where Apple Computer would be today if they just added bells and whistles to the Macintosh.

Garages Garages are now used for automobiles, bicycles and household storage. Inventors with new ideas for bank tech solutions have disappeared.

Innovative Bankers In all the stories I have read about innovative bank CIOs, the main idea about their innovations is how to improve the business model of IT to deliver better service, efficiency and economies. In my opinion, that is indeed innovative because in past decades, bank CIOs were product oriented. They had to have the latest IT "toys" to rank as an innovator. The kinds of innovations the modern day CIOs (businessmen first, techies second) are implementing these days do not put money in bank tech company coffers.

Regulatory Agencies Even though regulatory agencies are viewed as guardians rather than entrepreneurs, they have contributed more new sales for bank tech vendors than any event. Two new sections have appeared in Automation in Banking in the last three years as a result of the need for data security, online protection, fraud prevention, disaster recovery, risk management and business intelligence. Beware of the next round of garage-based government agencies. They will surely be focused on lending risks.

A New Breed of Investors Forget the Vulture Capitalists and Wall Street firms. They're still reeling over Michael Lewis's new book. There are only three places to go for any young guy with a wild idea - Jacksonville, Brookfield and Monett.

I've always been a believer of the idea of "Build it and they will come." These days I have modified that statement for the bank tech space as, "Build what's missing and bankers will buy it." It seems like nothing's missing these days, but what do I know?