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."

Going Mobile

The driver behind many banks' core upgrades is the need to improve the customer experience, particularly as it relates to integrating traditional and newer channels. And no channel is likely to see greater interest in the coming year than mobile banking.

"The mobile banking space is developing incredibly rapidly," says Vince Hruska, SVP and director of product solutions and strategies at Los Angeles-based City National Bank ($21.8 billion in assets), which serves private and business clients. "We see not only lots of bank adoption of mobile banking, but clients are rapidly adopting mobile banking as well."

Indeed, a recent survey conducted by ABI Research (Oyster Bay, N.Y.) found that 53 percent of American consumers use, or intend to use, their smartphones for mobile banking. But for the private and business client segments that City National serves, mobile banking is not commonly available, Hruska notes. As City National builds a solution, "Our focus is to make sure it's for more than just basic banking services," he says. "We want to put in a platform that will allow us to expand our capabilities over the long haul, not just get an implementation out the door and have to replace it a year or two down the road."

To enhance the customer experience, City National also will redesign its client-facing technology for customers of both the wealth management and banking sides of the business, Hruska reports. "When you have that kind of client, you want to make sure you can show a total picture of their relationship with the bank and serve their needs across banking and wealth management as seamlessly as possible," he stresses. "We have online efforts centered around making that experience as robust as possible." The project, which will call on both internal and external IT resources, will involve data integration and site navigation/ease-of-use improvements, according to Hruska.

1st Mariner also is amping up its mobile play in 2011. The bank initiated a soft launch of Wireless Application Protocol (WAP) and SMS-based mobile banking this year -- it put a mobile banking icon on its online banking site, 1stmarinerbank.com, and 600 people registered in three months, with no marketing or advertising efforts, Lynch relates. Early in 2011, however, it will start a marketing campaign around the mobile services. "I think mobile adoption will be significant," Lynch says.

Keeping It All Available

With so much going on in IT, and with technology's ever-growing influence on the customer experience, it perhaps is more critical than ever that banks keep their systems up and running. To help it watch everything in its global IT infrastructure and fix any problems that might be affecting business processes, Navy Federal plans to deploy business service management solutions next year. "We're changing the way we analyze outages to be more tuned to what the business impact is," reports the credit union's Hermes, explaining that the business service management (BSM) tools will be used to monitor online and mobile banking activity as well as traditional bank activity.

"It's going to be a collaborative effort with the business side to figure out which business services are the most important ones to watch," Hermes says. For instance, "They may not think much about FTPs going from one place to the other, but IT does. Each file transfer is part of a business process."

When the project is completed, dashboards and heat maps will enable IT staff to see which IT glitches are affecting which parts of the business so they can resolve them, Hermes adds. The software also will enable the credit union to attach dollar amounts to outages.

"For us to go back to the business and say, 'If we're down X percent of the time with these applications,' doesn't mean much to them," Hermes says. "But if we say to them, 'This could mean $X amount a year in potential business impact,' it makes the call to put in a needed telecommunications upgrade for $100,000 very easy."