The Technology Evolution Gets a "B": Next to People Costs, Technology Represents One of Banking's Major Investments. A Survey Probes Tech Attitudes at Small and Mid-Sized Banks Today

Banking technology has come a long way since I first started peddling my ideas as a small cog in one of the big commercial banks and then with one of the classic business consulting firms, and finally on my own beginning in the 1970s. The industry offers all kinds of bells and whistles, from ubiquitous ATMs to sophisticated consumer and business internet banking products to state-of-the-art branch automation. Yet if I were a schoolteacher and the banking industry my student, I'd give bank technology efforts a B, today, and, to tell the truth, on parents night, I wouldn't hold out much hope for an A. True, the work gets done every day, on time and very accurately. What's lacking is fine-tuning and refinement. But the main reason I wouldn't give the industry an A is because the peripheral support activities that the industry has placed around its accounting and operations functions remain awkward appendages on a very functional body. Integration of systems continues to be a work in progress. Unnecessary complexity still exists, aggravated by high employee turnover among front-line staffs in many banks. In fact, customer-sensitive technology continues to sit in last place when it comes to spending priorities, and not necessarily because of its costs. Bankers pay much lip service to concepts like customer relationship management, but they aren't really pushing technological efforts to the max. The reason, in a word, is inertia. Let me put my B in a frame of reference. In 1987, The Wall Street Journal did a special study of technology in nine industries. Banking got a C-, the lowest grade. But in 18 years, it's only moved up to a B. Thus my concern about inertia. What's lacking in banks' efforts Through my consulting work, and in the course of analyzing the study recounted in this report, I've concluded that banks have been making two fundamental mistakes. The first is that most bankers continue to confuse meetings and generation of paper planning documents with genuine action. Talking and writing memos about technological breakthroughs that will help their banks punch through competitive barriers don't do a thing to trip up banking's rivals. And the reason that process hasn't become progress is that the industry frankly lacks a sense of urgency in this matter. When you go beyond the clear leaders, and get past pure talk, banking has become a 70-year-old man who just doesn't get excited about much of anything anymore. In too many banks, technology is treated like a big machine that is running. Bankers look at the machine and utter one of the greatest, most classic excuses for standing still: it ain't broke, don't fix it. How I hate that attitude. And, yet, it comes from the top of the bank. I often find that the upper echelons of banks don't know--and don't ask much--about what's going on down in the basement. I know that many bank information technologists feel that way. Indeed, when I go on a consulting assignment, I get out of the executive suite as quick as I can, because I find I learn a great deal more about what's happening--and not happening--with a bank's systems by getting down in the with the people who run the engines. It wouldn't be a bad idea for top management to try this. After my interviews in the basement I typically log 200 gripes from front-line employees. When I report them to management, there's a lot of squirming. In most banks, no one solicits gripes, so over the years, competent, but fearful, employees have compensated for system deficiencies by working outside the system. Is that productivity? By the time management sees the results of daily processing, everything looks fine. If the execs stood over shoulders in the basement, everything wouldn't look so fine. The study I'll be referring to is a semi-scientific survey I undertook late last year, working with a selection of large bank technology providers with some input from ABA Banking Journal (See the box, Study Sponsors. …