Tomorrow's Great Customer Experience Is Built on Today's Efficiency

To fuel technology innovation and improve the bank customer experience, members of Bank Systems & Technology's Reader Advisory Board say they'll continue to focus on driving down operational costs in the year ahead.

Even as banks contend with intensifying regulatory demands, ongoing world economic woes and only moderately larger budgets, they will be challenged to innovate in order to meet customers' evolving demands. A key to enabling the IT advances necessary to remain competitive lies in finding ways to drive down operational costs in order to free up resources for new projects that enhance delivery channels and improve the customer experience, according to members of Bank Systems & Technology's Reader Advisory Board.

Those institutions that had the foresight to begin core transformations and technology upgrades in the past year or so will start to reap the benefits of the increased functionality and efficiency enabled by those upgrades. North Shore Credit Union ($2.7 billion in assets) recently converted to New York-based Temenos' T24 core banking system, which runs on a Microsoft SQL platform. North Shore CIO Fred Cook says the Vancouver-based institution expects to realize gains from the investment in both its back-office and customer-facing operations. "We'll be looking to leverage its increased product and services functionality for front- and back-of-house departments," he says.

Although North Shore Credit Union isn't being hit with the same regulations that U.S. institutions face, resources remain tight, Cook suggests. The credit union's 2012 IT budget is "comparatively modest to the market" and will increase only slightly, by about 2 percent, he reports.

Roseburg, Ore.-based Umpqua Bank (nearly $12 billion in assets) will spend part of 2012 completing the technology projects it began over the past few years, including a complete infrastructure overhaul, a refresh of technology such as ATMs and the conversion of all locations to Cisco VOIP, says CIO Colin Eccles. "Over the past year or two we've been very focused on having all of our technology infrastructure in place," he explains. "We grew over many years by acquisition, and we're making sure all the components of our infrastructure are up to date. I'm confident that once that's all in place, the infrastructure to support the long-term future of the bank will be exactly where it needs to be, and technology will never be a barrier to future bank growth."

Similarly, Paul Johnson, CIO at Winston-Salem, N.C.-based BB&T ($168 billion in assets), says his bank will continue an IT centralization program as well as a core systems replacement and will look to invest in its mobile capabilities. "We're going to continue to be in a struggling economy, which means that from a business investment and customer perspective, it's going to be more of the same going into next year," he says.

Johnson confirms that expense management and consolidation will remain top of mind for many bank CIOs. "We're going to need to be able to maintain a really tight control over expense management, and a number of our initiatives will be more around driving some additional costs out more through automation activities and other cost-reduction activities," he says.

Umpqua's Eccles agrees, noting that over the next year, Umpqua will continue to invest in boosting operational efficiency, business process automation and workflow, while moving away from paper to e-documents. "We will try to drive efficiency so we can spend more time on the technology innovation side," he says.

Looking to the Cloud for Efficiency

As part of its effort to achieve efficiency goals, Eccles continues, Umpqua already has invested significantly in virtualization. "Everything that can be done with regard to cloud and virtualization we've already done," he relates. "As we built out our infrastructure to support disaster recovery, we created our own internal virtualized infrastructure, which in my mind is our own internal cloud."

BB&T also is adopting virtualization, Johnson says. But the bank is in the early stages of building a cloud to support a utility-based IT delivery model in which the bank is a broker for services instead of having services and systems run and built at the bank. Moving in that direction will allow the bank to be more flexible in an uncertain economic climate, he explains. "What we're looking to create is an IT organization that is more flexible, with the ability to flex staff up and down and the ability to take advantage of what is increasingly going to be a more utility-based IT environment than what we see today," he says.

North Shore's Cook acknowledges that cloud computing has its advantages and will continue to build momentum, but he also voices concerns about the challenges associated with the technology. "You can't turn around without cloud computing being mentioned, so I have to believe it will trend up," he says. "But the challenge of cloud interoperability in supporting blended environments will still be an issue, and along with government and industry regulatory issues, it will come under greater scrutiny."