Top Ten Trends Impacting Bank Technology for 2015 - Part One

First of a Two Part Series
by Jimmy Sawyers, BOL Guru

When the winds of change blow, some people build walls, and others build windmills. --- Chinese Proverb

As we look ahead to 2015, the winds of change are clearly blowing. Bankers will be called upon to build "windmills" as new technology will be needed to drive efficiency, increase productivity, and meet the demands of today's tech-savvy customer; however, bankers will have to build walls to protect customer information, mitigate the risk of corporate account takeovers, and fight the growing number of cybersecurity threats.

To help our banker friends plan for the walls and windmills required to succeed in 2015, we offer ten predictions:

Prediction #1 - Cybersecurity Takes Center Stage

As of this writing, the Sony Pictures Entertainment corporate network had been down for six weeks straight due to the hack attributed to North Korea. Bankers have become all too familiar with corporate account takeover (CATO) incidents and data breaches at third-party processors but how will bankers react to a Sony-like breach where embarrassing emails, employee salary and healthcare information, and internal audit reports are leaked to the public? Adding to the damage, network and data destruction that could require weeks or even months to rebuild. Michael Lynton, the movie studio's CEO put it bluntly, "They came in the house, stole everything, then burned down the house." Would your bank survive such an incident?

Remote-access Trojans delivered by spear-phishing campaigns will remain the easiest way for intruders to penetrate bank networks.

Malicious software designed to exploit recently patched security weaknesses in Microsoft programs and third-party software such as Adobe and Java will keep bankers scrambling to enhance patch management efforts. Ransomware incidents will continue to grow as cybercriminals extort money from users with smartphones and other mobile devices becoming popular targets. Without the proper security measures and testing in place, banks could have intruders already inside their networks, plotting a future attack.

Those waiting for a piece of paper from the government to tell them what to do regarding cybersecurity are woefully behind and run the greatest risk of attack.

Bankers will rise to the cybersecurity challenge in 2015 and will hire qualified firms to ramp up IT Audits and conduct in-depth Network Vulnerability Assessments that include social engineering testing, vulnerability scanning, and enhanced penetration testing.

Challenge Question: Does your bank have the proper cybersecurity defenses in place and does it test them regularly?

Prediction #2 - Bankers Struggle to Harmonize the Blurred Lines of Their Digital and Physical Worlds

Many banks now exist in two dimensions, the physical world and the digital world. The brick and mortar of the physical world represented by branches tends to be out of sync with the bank's digital world of mobile apps and other online services. This dilemma is exacerbated from the customer perspective when one walks into a bank branch seeking help with a mobile deposit app only to be shooed away to a call center or online tech support site. More shudder-worthy is the branch employee's comment, "I don't use our mobile apps so I surely can't help you." Such dismissive customer service drives potentially loyal customers to the bank's competitor. More often these days that competitor is a non-bank.

As mobile apps become the predominant online banking system and preferred interface, traditional Internet banking as we know it will fade from the scene. Apps move to the desktop and exist across all screens, offering a consistent customer experience.

To put a banking spin on the Rudyard Kipling quote, "Oh East is East, and West is West, and never the twain shall meet," until bankers bridge the gap we will continue to see that, "Oh a branch is a branch, and an app is an app, and never the twain shall meet."

Challenge Question: How well does your bank coordinate its digital and physical worlds to harmonize the customer experience?

Prediction #3 - Successful Community Banks Become Smart Community Hubs to Promote Learning, Living, Working, and Giving™

Already active in their respective communities and critical to their local economies, community bankers will use technology to establish their banks as smart community hubs and improve the quality of life for their customers. Four areas of focus will be learning, living, working, and giving.

Bankers will facilitate lifelong education and knowledge exchange by providing access to personal financial tools and education, small business coaching, security awareness, and by connecting local knowledge leaders with the next generation of bank customers.

By guiding customers through major life events and their financial implications, bankers will help them achieve their goals in their 20s, 30s, 40s, 50s, and beyond. College, first job, first car, marriage, children, homeownership, investing, and retirement planning, bankers will segment customers in these age groups and help them focus on why they work and how their financial decisions can enrich their lives.

In a recovering economy with improved prospects for job-seekers, bankers will help customers start their careers and succeed, connecting employers and potential employees. Wise bankers will not hesitate to make a microloan to finance a suit and tie. Such a seemingly small transaction could be life-changing. Further, bankers will make the bank available when customers need it, often after their normal working hours.

Connecting local causes with the right resources will further demonstrate the importance of community banks as smart community hubs. Beyond sponsoring and hosting fundraisers, these banks will focus their social media channels on giving and community enrichment.

Such learning, living, working, and giving will be made possible by using technology tools for better customer communication ranging from online scheduling systems for customer meetings to after-hours video calls to discuss financial events. Banks will increase branch traffic by making conference rooms available to local community groups and small businesses for their use or for informative seminars and education on a variety of bank-sponsored topics. Bankers will learn that keeping customers engaged is a winning strategy and technology can help with that engagement.

Challenge Question: How well does your bank promote learning, living, working, and giving in your community?

Prediction #4 - The Branch Lives but Transforms

Branch footprints continue to shrink. The branch is not dead but it will look different in the future. New branch designs will incorporate technology and will offer a more visual customer experience from tablet computer banking to video walls, all in-branch. While tech-savvy customers rarely visit the branch, this does not mean the branch is obsolete. There are still times when customers and bankers need to meet in person.

Faced with the choice of building a $1.3 million branch or buying a $100,000 Smart ATM, many bankers will test the latter as a branch alternative. As we predicted last year, these Smart ATMs will enjoy widespread deployment and will be popular with customers.

As bankers continue to find ways to take the bank to the customer, on the customer's terms, expect e-sign efforts to take hold. Bankers will help customers complete complex transactions using better file transfer tools and sophisticated online services. Serving customers remotely will be critical. However, don't look to the sky just yet. Customers may not be ready for drone banking for quite some time (tongue firmly in cheek).

Challenge Question: Is your bank's branch network designed for the future?

Prediction #5 - Technology Startups Spark Innovation and Stifle Stagnation

Those of us who collected baseball cards in our youth will recall the mistakes we made when we opened a pack of cards and were disappointed to get a no-name rookie in the batch instead of a well-known all-star player. Because we didn't know the rookies, they got relegated to the "bad" pile, put on our bicycle spokes, or used as targets on the dart board. Big mistake, as those rookie cards are the most valuable when the player develops into a hall of famer. We often discount the unfamiliar as unworthy. We don't recognize talent and potential when it's staring us in the face.

In banking technology, just as in baseball, today's rookies are tomorrow's stars. Startups can be viewed as risky, and most are, but they also represent necessary change in an industry beset by stagnation.

2015 will be the year we see more innovation to break 14 long years of relative stagnation in banking technology. Be open-minded to new technology and be able to spot those diamonds in the rough, the talented people, improved processes, and new systems needed to lead your banks into the future. Of course, the same due diligence fundamentals apply and should be followed for any significant decision.

Challenge Question: Are your veteran technology providers performing and delivering or is it time to consider some rookies with all-star potential?

Please note: The views or opinions expressed in this article are those of the author and do not constitute or imply an endorsement or recommendation by BankersOnline.

Sawyers & Jacobs LLC helps banks in four major areas: Technology Planning, Risk Management, Network Solutions, and Business Continuity. Our mission is to help our clients use technology securely, effectively, and profitably to better serve their customers, comply with laws and regulations, contain costs, and compete. We make banks better. To learn more, visit www.sawyersjacobs.com, call 901.487.2575, or email jsawyers@sawyersjacobs.com.