2016 Technology Survey: Trouble at the Core

As the banking industry struggles to innovate to meet shifting consumer expectations, 81 percent of bank chief information officers and chief technology officers responding to Bank Director’s 2016 Technology Survey say that their core processor is slow to respond to innovations in the marketplace.

Banks are highly dependent on companies that provide them with core processing technology, which at its most basic contains vital customer data and processes all customer transactions, and these relationships can be intricate: Just 4 percent say that their bank uses the core provider for core processing only, with no additional services. Seventy-one percent use their core’s mobile banking platform. Three-quarters rely on the core for bill pay and/or remote deposit capture.

In June and July, Bank Director conducted an online email survey of 199 board members and senior executives of U.S. banks between $250 million and $20 billion in assets, including CIOs, CTOs and chief executive officers. The 2016 Technology Survey is sponsored by CDW, headquartered in Vernon Hills, Illinois.

A growing number of technology providers seek to partner with and serve the industry, filling the innovation gap created by slow-to-respond core providers. Nineteen percent of bank executives and directors—including 30 percent of bank CIOs and CTOs—report that their bank has pulled back on plans to integrate a more innovative product, service or delivery channel due to the inability or unwillingness of the bank’s core processor to support that activity. An additional 11 percent of total respondents—and 22 percent of technology executives—say they’ve pushed on with plans to innovate despite negative pushback from the core.

The survey also finds that the ability to effectively use data plagues respondents. Seventy percent indicate that their bank could better use data to serve the needs of existing customers, or identify new customers. A further 15 percent say their institution doesn’t use data analytics.

Other key findings:

• Cybersecurity still looms large: Having a strong technology infrastructure in place to protect against cyberattacks remains the top technology concern for survey participants, at 72 percent.
• Thirty-one percent of respondents have converted their bank’s core technology within the past five years. Forty-two percent converted their core more than 10 years ago.
• Respondents report that their bank works with a median of five technology firms, including the core provider.
• Sixty-one percent of participants see fintech firms as both competitors and partners.
• Online marketplace lenders should be more heavily regulated, say 60 percent of respondents. Forty-one percent worry that they’ll lose loans to these lenders, but 18 percent don’t think these lenders have long-term viability.
• Opinions are mixed on the impact that blockchain—the underlying technology behind the digital currency bitcoin—will have on the banking industry. Twenty-four percent believe it will impact all banks. However, 57 percent don’t understand blockchain enough to form an opinion, or have never heard of the technology.
• Seventy percent of respondents believe that technological innovation is a priority for their board, but less than half discuss technology at every board meeting. 

To view the full results to the survey, click here.