They feel threatened by regulators, aggressive new competitors, and customers with ever higher expectations, all while still suffering from the occasional flashback to the near-death experience of the financial crisis. In response to the threats, banks have been throwing piles of money at new technology in the hope of some reprieve.
These aren’t small piles of money, either. And according to studies from Celent, the spending doesn’t show signs of slowing down anytime soon.
The issue for many bankers, though, is not necessarily that the costs are mounting. Instead, the biggest concern is that the bank’s resources and staff are stretched incredibly thin, and that the projects now seem to be floundering with questionable (or negative) ROIs. With too few talented staffers trying to implement too many tools, the failure rate is increasing.
Given that the pace of spending doesn’t look like it will be slowing down anytime soon, banks need to better understand why the tools they’ve deployed aren’t working. Below are a few of the most common causes.
Too Many Back-Office Tools
Given the massive growth of the regulatory burden, banks have understandably focused their investments on “back-office” tools. Banks often feel they have little choice but to implement tools to assist with regulatory compliance and risk management. Both are logical and often necessary. However, there is little measurable return on these investments and banks have been feeling the squeeze on earnings as a result.
The reaction has been to look for ways to cut costs, leading to investments in tools focused on efficiency and reduced headcounts. What is the ratio of your recent investments between internal and customer-facing tools? When was the last time you spent meaningful resources on improving the customer experience or growing revenue? Many bankers are embarrassed by the answers to those questions, especially since there is a whole new generation of competitors out there focused only on the customer experience.
Falling Victim to Bundling
A colleague recently returned from a family vacation where he served as IT support for everyone’s devices and internet connections. He commented that most of his family members were stuck with subpar service and plans, but felt trapped since the services have been bundled together by the providers.
For example, they might have a slow internet connection and lousy channel selection in their cable package, but don’t feel that they can swap out either piece on its own. That should sound pretty familiar to bankers. For years they have been promised tighter integrations and lower costs by bundling tools, usually from their core providers. Let’s just say the results have been less than stellar, and many are finally returning to the “best of breed” approach to buying tools, especially since integrations have been greatly simplified by cloud-based technology.
Tools Without Champions
The implementation strategy for most banks is to sign a contract and then throw it over the wall to the IT department. The IT group implements it as best they can, imposes it on the end users, and then returns to “putting out fires” mode. This is not a criticism of IT departments, as that is exactly what they are supposed to do. However, for a tool to truly be successful, it needs a champion from the line of business that owns and uses the tool.
The champion should be someone with a deep understanding of the business case for the tool and a true empathy for end users. This is the only way to ensure that end users get real value out of the system instead of it just being another set of steps imposed on them.
In addition, the champion can see the impact on the bank’s performance, and can iterate and improve on the tool over time instead of simply fixing critical errors. This continual improvement allows the tool to stay relevant for a longer period of time, which of course allows the bank to recoup more of the investment.
Embrace, Then Execute
Today’s banking world is moving faster than ever, and the pace has only been increasing as technology is woven deeper into the fabric of the business. For banks to thrive in this brave new world, they need to move away from feeling attacked, and instead embrace the nearly unlimited opportunities. To do this, though, we must all learn to better execute with the tools we buy. If we don’t, someone else will!