Time for a Mid-year Bank IT Review

Six months ago, I provided a Bank IT forecast for 2010 (Bank Tech Budgets: Making Sense of Up, Down or Sideways) which noted that "the expectations for 2010 face a continued air of uncertainty for IT spending."This forecast started with the belief that there are three types of financial institutions: survivors, the walking wounded, and dying institutions. The outlook for IT initiatives and IT spending is tied to how many institutions fall into each category.

At a macro level, every institution should focus on its "mission critical" IT requirements. Assuming management's endorsement of these requirements, decisions on which IT investments "should" be addressed is much easier to prioritize. In general, all institutions should be making IT investments that improve the bank's ability to serve customers and their needs -- which touches on products, distribution channels, and analytics to highlight three key areas. The state of an institution's IT infrastructure and capacity to modify and/or integrate new application capabilities is one long-term "mission critical" requirement that is sometimes overlooked or ignored by banks and credit unions. Another "mission critical" area is the ability to view business results and client relationships from a comprehensive customer-centric perspective. Some smaller institutions get the mission-critical value and have moved faster and more effectively than most big banks.

The overall market shows signs of growth where strategic initiatives are on the table as evidenced by new, long-term commitments for "mission critical" IT initiatives by banks of all sizes. These initiatives range from targeted needs to enterprise-wide ones through a variety of vendors.

* Citizens Bank, the eighth-largest US bank, which is owned by Royal Bank of Scotland, announced a $500 million multi-year IT investment plan that will cover new systems for tellers, commercial loans, home mortgages, and enhancements to cash management and online banking systems.

* First Bank (Missouri), an $11 billion bank, is pursuing an incremental IT initiative that build upon existing investments to overhaul two important electronic channels. This bank selected online banking, bill pay and mobile channel solutions from Fiserv to modernize and integrate these channels with existing investments from Fiserv, including its core banking platform.

* Andover Bank (Ohio), Peoples State Bank (Wisconsin), First Savings Bank (Indiana) and Indiana First Savings Bank (Indiana) are examples of community banks that are making strategic investments to streamline operations, improve workflow/business processes and reduce the "time" component. Andover, a $270 million bank, selected COCC to automate accounting and compliance, eliminate paper, and generate efficiencies throughout the bank, including a 10-fold reduction in the time needed to open a new account. Peoples State Bank, a $600 million bank, selected Jack Henry for a broad portfolio of solutions, including core banking, multiple channels, and decision-support solutions, to overhaul its enterprisewide automation capabilities. First Savings Bank, a $520 million bank, selected Harland Financial Solutions' core banking platform and more than 10 other solutions as its enterprise solution. Indiana First Savings, a $230 million bank, is upgrading its core banking platform with Open Solutions along with financial accounting, planning, document management and CRM solutions. All four banks chose outsourcing over in-house implementations.

Bill Bradway, founder and managing director of Bradway Research LLC, analyzes the business strategies and IT investments of US banks and credit unions.