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Management Strategies

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2011 Bank Technology Outlook: Major Projects, Bigger Budgets in Store for Bank CIOs

Bank CIOs will be charged with pursuing major tech projects -- including compliance, core systems and mobile banking initiatives -- in 2011, members of BS&T's Reader Advisory Board report. The good news is, they're likely to have more money to complete them.

More from the 2011 Bank Technology Outlook:

Banks have big things in store for their technology in 2011. After several years of reactionary cost containment, the industry is looking forward to better times, and many financial services firms are prepared to increase their investments in IT in the year ahead.

In fact, based on insight from members of Bank Systems & Technology's newly formed Reader Advisory Board, most banks will undertake major systems upgrades in the next 12 months. Accordingly, senior technology leaders characterize their 2011 IT budgets as higher, or at least flat, compared with 2010 tech investment.

Of course, regulatory pressures and the need to improve reporting are major drivers of this increased IT spending, a fact confirmed by several Reader Advisory Board members. "Responding to regulatory requirements [and] expectations" will be a top priority for Winston-Salem, N.C.-based BB&T ($155.1 billion in assets), reports CIO Paul Johnson. Adds Jerry Hermes, CIO of Navy Federal Credit Union, "The regulatory changes we have to watch for next year will be huge." But with business growth again a priority, banks also are seeking to improve their competitive positions.

Baltimore-based 1st Mariner Bank ($1.33 billion in assets) is among several banks that will pursue core banking upgrades or all-out rip-and-replace initiatives in 2011. According to Kevin Lynch, SVP, e-commerce/contact center, the bank will conduct an RFP process next year to replace its current core system. 1st Mariner doesn't have a choice, he explains -- its contract with its core banking provider, which he declines to identify, is up at the end of next year and the vendor is sunsetting the software in 2012.

"Frankly, this will be so big that the rest of our projects pale in comparison," says Lynch. "It will be an intense 12-month process."

1st Mariner also will review all of the ancillary systems that tie into the core platform, Lynch adds. "This is so big that I don't think we'll have many other priorities in 2011," he continues, noting that the project will push the bank's IT budget up next year.

Lynch says he's looking for a technology provider that's forward-thinking and can stay ahead of industry trends, rather than react to them after the fact. He notes that 1st Mariner is working with Scottsdale, Ariz.-based Cornerstone Advisors to select a vendor.

One technology piece that Lynch particularly is looking forward to upgrading is online banking. "The online banking we use is probably seven years old in terms of user design and functionality," he acknowledges. "Think about what's changed in seven years."

While the bank's online platform is reliable and functional, Lynch says, "It's certainly not the user experience a customer expects when they go online." 1st Mariner's existing core banking vendor does offer newer bill payment and online banking software, but the bank's older core system is not compatible with the newer solutions, he explains.

Lynch also will welcome a new systems' improved account-opening process. "The one we use today is fairly complicated," he says. "It's not an easy process to go through for our platform people."

Data, Data Everywhere

Navy Federal Credit Union ($44 billion in assets) also will move to enhance its core banking system, but the Vienna, Va.-based institution will stay with its existing vendor, reports CIO Hermes. He says he is looking forward to the new data structure, standardized data access routines and a services-oriented architecture that will be part of the upgraded solution.

Moving to a services-oriented strategy, Hermes asserts, will help the credit union quickly adopt new services.

As part of the core modernization, Navy Federal also plans to upgrade its desktops to Windows 7 (although it intends to keep running some older mission-critical applications on virtual XP desktops). "Microsoft is forcing people's hands on this, saying, 'If you want to continue to get security patches, you have to move to Windows 7,' " Hermes asserts. But, "If they were to reverse that and say, 'We've decided to support XP for another three years,' we'd probably hold off."

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