It’s been said technology overpromises and underdelivers in the short run, but overdelivers in the long run.

Looking across the financial services industry, many banks view technology as an existential crisis, some see the opportunity to expand and still others envision it as the pathway to greater efficiency. Ultimately, technology in the bank space is likely some combination of these. That has created an undeniable internal imperative for executives to identify technology that grows the institution or improves efficiency. Change is not coming – it is here. That is why any technology discussion at the board level must focus not only on strategic initiatives but also the probability of success. Bank boards and management teams can achieve this with a disciplined framework.

2 Critical Questions
For banks, the first step in decisioning new technology investments is to answer two questions:

  1. Are proposed technology investments aligned with the bank’s stated strategies?
  2. Should we build, buy or partner for a solution?

The first question likely will require further discussion from directors, but the second question may be relatively easy to answer through another question: Does the bank have internal resources to build the product or service? Can it afford the number of software coders required to create and maintain a compelling user experience, or UX? If not, partner it is.

But boards must thoughtfully consider that first question. Directors should assess whether or not a given technology investment is aligned with the bank’s strategic direction by evaluating three key pillars that contribute to excellent UX: infrastructure, operational excellence and innovation. It is worth noting UX may be geared toward clients as well as employees, and there generally is overlap in ideas across pillars. However, it is critical that banks evaluate all the pillars along with the ultimate audience in order to understand if an investment is the right fit for their institutions.

3 Key Pillars
The first pillar, “infrastructure,” considers stability and scalability of the innovation, including items like a cloud banking strategy or selecting a core provider. Let’s use a cloud banking strategy as an example. Can a bank’s infrastructure support the applications that meet its target clients at the level of their needs, while minimizing the probability of disruptive downtime? What are the risks of maintaining physical servers, and does that physical infrastructure put limitations on scalability? These are just hypothetical questions, but prior to an investment, it’s important to think through every angle of how the technology would evolve over time.

The second pillar, “operational excellence,” focuses on efficiency improvements. Some examples would include leveraging application programming interface (API) usage, automation and real-time processing. This pillar is all about the bank using resources that allow employees and functions to work smarter, faster and more seamlessly.

This is arguably the easiest pillar for banks to visualize. Take automation, for example: It’s easy for directors to start by asking questions about process such as, “Are commercial loans manually onboarded? If so, how does this affect pace and quality of work? Can a third-party application be easily integrated to the core via API?” Thinking through the process end-to-end helps banks to identify areas ripe for transformation.

The third and final pillar, “innovation,” tends to generate the most buzz because it is the most visible to clients and employees. There are plenty of examples of banks of all sizes designing a better mousetrap, including innovations like automated cash forecasting, earned wage access or real-time cross-border transactions. Banks unable to innovate on their own can work with numerous companies interested in partnering or white-labeling an entire product suite. The critical goal of this pillar is to provide a solution that serves the bank’s target client in a way that makes their life easier. If that’s not the case, widespread adoption may remain elusive, wasting both the bank’s time and money.

The pillars would be incomplete without mention of their foundation: compliance and cybersecurity. It’s incredibly important to consider all aspects of technology investments with this in mind; any lapses could lead to significant regulatory risk for a bank.

The financial services industry has come a long way in adopting and leveraging technology over the last few years, but there’s still more road left to travel. Bank boards that use a disciplined process for decisioning technology investments will gain the opportunity to focus on client needs and ensure that their institutions invest in the right solutions for the future.


Matt Schultheis