2019 Survey Results! Here’s How Banks Are Spending Money on Technology

The desire to streamline customers’ experience and improve efficiency is driving bank technology strategies across the industry, as most executives and directors believe their offerings are “adequate,” according to Bank Director’s 2019 Technology Survey, sponsored by CDW.

The survey, conducted in June and July 2019, reflects the views of CEOs, technology executives and independent directors. It seeks to better understand bank strategies, staffing and budgets around technology and innovation, as well as banks’ relationships with legacy core providers and newer vendors.

Seventy-eight percent of survey respondents say that improving the customer experience is a top objective driving their bank’s strategy around the investment, development and implementation of technology. Seventy-two percent say that fueling efficiency is a top objective.

These strategic objectives are driving where banks are investing in technology: 68% say they’re investing in automation in fiscal year 2019, and 67% are investing money to enhance the bank’s digital channels.

Most banks rely on their core provider to advance these goals. The cores are the primary providers for many of the technologies used by banks today, including application programming interfaces (68% say that API technology is provided by the core), business process automation (43%), data aggregation (42%) and peer-to-peer (P2P) payments (47%).

That relationship isn’t stopping many banks from searching for new potential partners; 60% are willing to work with newer fintech startups. The survey finds that the use of alternate providers is gaining ground, in particular when it comes to the cloud (57%), data aggregation (25%) and P2P payments (29%).

Despite the rise of the digital channel, 51% of respondents say the branch is equally important to online and mobile channels when it comes to growing the bank. More than half indicate they’re upgrading branch and ATM technology.

Just 30% say that driving top-line growth fuels their technology strategy, which indicates that most banks see technology as a way to save money and time as opposed to generating revenue.

Key Findings

  • Loyal to the Core. More than half of respondents say their core contract expires within the next five years. Sixty percent say they’re unlikely to switch to a new provider.
  • But Banks Aren’t Satisfied. Just 21% say they’re completely satisfied with their core provider.
  • Technology Pain Points. Sixty percent say their current core provider is slow to provide innovative solutions or upgrades to their bank, and almost half cite difficulty in implementing new solutions. These are major sticking points when 60% rely on their core provider to introduce innovative solutions.
  • It’s All on IT. Almost three-quarters point to the senior technology executive as the individual responsible for identifying, developing and implementing technology solutions. Almost half task a management-level committee to make decisions about technology.
  • Rising Budgets. Forty-five percent say their technology budget has risen between 5% to 10% for FY2019. Almost one-quarter report an increase of more than 15%. Responding banks budgeted a median of $750,000 for FY2019.
  • Where the Money’s Going. In addition to automation, digital enhancements and branch improvements, banks are hiring consultants to supplement in-house expertise (50%), and bringing on additional employees to focus on technology and innovation (43%).
  • Data Gap. Almost half describe their bank’s data analytics capabilities as inadequate.
  • More Expertise Needed. Fifty-three percent say technology is on the agenda at every board meeting — up three points from last year’s survey. Yet, 80% say the board needs to enhance its technology expertise. Forty-three percent say they have a technology expert on the board.
  • Cybersecurity Top of Mind. Protecting the bank from cyberattacks dominates board technology discussions, according to 96% of respondents. Many boards also focus on process improvements (63%) and implementing innovative customer-facing technology (46%).

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

Five Insights into the Top 25 Bank Search Terms


customer-6-20-19.pngBanks can use customers’ search queries to create a more efficient, optimized user experience.

Most marketers rely on search engine optimization to drive traffic to their website, missing a crucial opportunity to optimize searching on the site itself. But on-site search optimization is a critical component of search and self-service for customers, and is a way that banks can create a better experience for users.

Search engine optimization, or SEO, focuses on attracting new visitors to a website. On-site search optimization addresses the existing and returning traffic base—a bank’s current customers and prospects. This approach helps them find helpful and relevant content once they are on the site, which is as important as getting them to the website or mobile application in the first place.

A growing percentage of customers use digital channels to interact with banks and require intuitive search and easy-to-find support information. Banks will benefit from delivering superior on-site search functionality with actionable support answers on their websites and mobile apps.

Transforming a bank’s website, mobile or online banking applications into a true digital support center involves more than a simple search bar. Search terms and activity can be used to inform the support content strategy, while monitoring customers search queries ensures a bank is providing the most sought-after answers across its digital and mobile channels. This continuous process directly impacts an institution’s customer experience, service levels and operational efficiency.

The top 25 search terms across banking websites in 2019 included:

1. Routing Number 10. Direct Deposit 19. Mobile Deposit
2. Overdraft Protection 11. Rates 20. Login
3. Order Checks 12. Address Change 21. ACH
4. Skip Payment 13. Loan Rates 22. Stop Payment
5. Online Banking 14. Debit Card 23. ATM
6. Wire Transfers 15. Check Card 24. Mortgage
7. Credit Card 16. IRA 25. Bill Pay
8. Open Account 17. CD Rates  
9. Account Number 18. Hours  

Customers’ search patterns in a bank’s digital and mobile channels differ the terms used in a search engine platform such as Google or Bing, according to data from SilverCloud. Searches on banking websites and apps average 1.4 words per search, compared to four on search engine platforms. On Google, people search for “the best checking account for me;” on a banking website, they use broader terms like “online banking.”

Two factors drive this search behavior. First, banking consumers are already on the desired site, so they use more narrow search terms. Second, financial terminology can be confusing and unfamiliar. As a result, customers who lack knowledge of specific banking terms tend to use broader search terms to home in on exactly what they need.

There are five takeaways for banks that are interested in how top search terms can help them grow more efficiently:

Banks need to deliver a better customer experience. Having a strong on-site search engine allows customers to service themselves in a way that is easy, fast and efficient.

Strong search could reduce call center volume. Having robust content, frequently asked questions and support answers allows customers to get answers without needing to contact call center agents.

Provide support as mobile adoption increases. Customers will have more questions as banks introduce more self-service options, like online account opening, mobile deposit and online bill pay. Banks should anticipate this and have support answers in place to facilitate faster adoption.

Create opportunity and invite action through search. Banks can drive deeper customer engagement into various product offerings by writing actionable support answers. For example, the answer for a search query for “routing number” could include information about what customers can do with a routing number, like set up direct deposit or bill pay. This approach can increase the likelihood they take such actions.

Banks can do more with less. The more that customers use self-service digital and mobile channels and find information that addresses their queries, the fewer employees a bank needs to staff customer service centers. Institutions may find they can grow without adding a commensurate number of employees.

Banks should review their digital channels to ensure they are providing support content that addresses the ways customers seek information. Content around general search terms needs to be robust. Executives will need to keep in mind that most search terms require 10 or more custom answers to address the transactional, informational and navigational forms of customer intent.

Banking Enters a New Age Of Technology


industry-1-29-19.pngTen years ago a technology session at a banking conference wouldn’t have drawn a standing-room only crowd of experienced community bankers, but in 2019 you’ll see a much different scene.

Many of the 800-plus bankers attending Bank Director’s Acquire or Be Acquired Conference at the JW Marriott Phoenix Desert Ridge resort in Phoenix, Arizona were eager to soak up knowledge about technology—which many experts see as the answer to both the competitive pressure being applied by fintech companies from outside the industry, and from customers who want digital alternatives to the industry’s traditional distribution channels.

The shift in attention to tech-focused content is a clear indication that bankers are taking technology more seriously than they ever have—and for good reason.

“We’re entering a time where outside forces feed on the unprepared—maybe not directly but I think they create conditions that will make it very hard for unprepared institutions to survive,” said Mike Carter, executive vice president at the consulting firm SRM Corp., who made a presentation Monday on the threats posed by nonbank payments companies.

The good news, Carter said, is community banks can now more easily compete up-market despite the wide gap in deposit share compared to the country’s biggest money center banks that invest as much as $11 billion per year on technology. It no longer requires millions in up-front investment, Carter said, as many fintech firms now sell their technology through licensing fees.

The catch is that some banks will have to recalibrate their strategies and think of it as “banking in reverse,” said Frank Sorrentino, chief executive officer of $5.6 billion asset ConnectOne Bancorp, based in Englewood Cliffs, New Jersey.

Sorrentino, who participated in a panel discussion Sunday outlining strategies for growth, said ConnectOne has operated from its formation as a de novo in 2005 with the customer’s needs foremost in mind. Instead of thinking about what products would sell best, they thought about what the customer wanted and how they could provide that—and that has contributed to the rapid growth that ConnectOne has experienced.

“Technology gets you on the road to (grow),” Sorrentino said.

Before he became a banker, Sorrentino was a home builder who had become frustrated with the service he received from his bank—so he decided to start his own bank with a customer-first strategy.

Sorrentino’s philosophy is one that is becoming increasingly common among executives, said Pierre Naudé, CEO of nCino, which markets a cloud-based bank operating system to banks.

“I think it’s a new breed of C-suite people that’s coming up that’s actually adept and used to technology and very comfortable talking about it,” Naudé said.

That philosophical shift among bank executives has been a transition, Naudé said, which began with the initial wave of fintech firms that caused disruption in the industry through their technical innovation.

This disruptive dynamic has been exacerbated by the growth in market share by the country’s largest institutions.

Since 1992, deposits held in the country’s 100 largest banks have increased more than 700 percent compared to a mere 18 percent in the smallest institutions, according to data presented Monday by Don MacDonald, chief marketing officer for MX, a Utah-based fintech firm.

MacDonald made the case that the industry is entering a fifth age—the so-called “data age”—that emphasizes the use and leverage of various levels of information to reduce cost, increase revenue and deliver an exceptional customer experience, regardless of asset size.

“What’s amazing about it is the role of the consumer,” MacDonald said.

That role was a common thread in technology-focused presentations and conversations at the conference, where most agree that the focus should become what the consumer wants, not what banks can deliver that will appease them.

It’s a reversal in the traditional relationship between banks and customers.

We as consumers have more choice than we’ve ever had in our lives, and perhaps more important is the friction to change is virtually nil,” MacDonald said.

“So if I don’t like you I can move from you at the click of a button, or from my current provider I can move to you at the click of a button.”

That precipitates a shift in perspective about how banks will think about growth, and in what terms that’s defined.

“Size isn’t a number,” Sorrentino said. “Size is your capability.”

Four Interesting Insights From High-Performing Bank CEOs


insight-1-11-19.pngThere comes a point in the process of mastering a subject (in this case, banking) when reading books or articles, or studying data, begins to offer diminishing returns.

After reaching that point, the best way to maintain a steep learning curve is to speak directly with authorities on the topic.

There are lots of authorities on banking—academics, consultants and lawyers, to name a few—but the ones who know the most are seasoned executives sitting atop high-performing banks.

I had many conversations with top-performing bankers in 2018. Here are four of the most valuable insights I picked up along the way.

1. The benefit of skin in the game
People in business talk all the time about the importance of a long-term mindset. Thinking long-term is especially critical in banking, given the leverage used by banks and the severe cycles that afflict the industry.

Unfortunately, in a world geared toward quarterly performance, maintaining a long-term mindset is easier said than done. When times are good and there are no signs of economic trouble, it’s only natural to relax lending standards to maintain market share.

Steering clear of this requires discipline. And one way to impose discipline is through skin in the game. If executives own large stakes in the institutions they run, they’re less likely to take imprudent risks.

This was one of the takeaways from my conversation with Joe Turner, CEO of Great Southern Bancorp, one of the industry’s top-performing banks over the past four decades.

“There are always going to be cycles in banking, and we think the down cycles give us an opportunity to propel ourselves forward,” he said. “Having a big investment in the company plays into this. It gives you credibility with institutional investors. When we tell them we’re thinking long-term, they believe us. We never meet with an investor that our family doesn’t own at least twice as much stock in the bank as they do.”

2. The pace of innovation in banking
It’s tempting to think the pace of innovation in the banking industry has accelerated over the past few years.

Even most millennials can probably remember when they had to visit a branch to make a deposit or check their account balance. Today, by contrast, three-quarters of deposits at Bank of America Corp., the nation’s second biggest bank by assets, are completed through its digital channels.

But this doesn’t mean bankers are strangers to change, because they aren’t. The industry has been in an acute state of evolution since the 1970s, when laws against branch and interstate banking started to come down.

Furthermore, while change is indeed happening, perhaps even accelerating, one benefit associated with operating in a heavily regulated industry is it won’t change overnight.

This was one of the takeaways from my conversation with John B. McCoy, CEO from 1984-99 of the notoriously innovative Bank One, which is now a part of JPMorgan Chase & Co.

“The digital thing is happening—it’s changing things—but it’s not going at warp speed or anything,” said McCoy “Maybe one of the reasons is that banks are still highly regulated, so it’s hard for an outsider to come in and disrupt the whole system. … But absolutely it’s going to make a difference, and in 10 years things will look totally different than they look today. But I don’t see any one thing that will change things overnight.”

3. Continuous self-improvement
In 2015, Phil Tetlock, a Wharton Business School professor, published his book, Superforecasting: The Art and Science of Prediction.

Don’t let the corny title fool you. Tetlock is a leading authority on the accuracy of predictions. The book walks readers through an experiment he conducted to determine whether some people can forecast more accurately than others.

Not only did Tetlock find some people were in fact better at forecasting than others—the so-called superforecasters—he also found those people shared certain traits.

Foremost among those traits is perpetual beta, “the degree to which one is committed to belief updating and self-improvement.” According to Tetlock, perpetual beta was nearly three times as powerful a predictor as its closest rival, intelligence.

It should be no surprise then that many top executives at top-performing banks share a similar trait, dedicating large amounts of time to learning and self-improvement.

Here’s how Brian Moynihan, chairman and CEO of Bank of America, answered my question about what he reads:

“It’s an eclectic mix, but basically newspapers, periodicals and I get a lot of books sent to me. It’s mainly just a lot of articles. The world has changed. It used to be when I delivered papers in college that I’d read The Boston Globe, The New York Times and The Providence Journal because I delivered them every morning. I still read them, but where I pick up most stuff now is from the article flow on a given day coming through all the feeds.”

He went on:

“Reading is a bit of a short hand for a broader type of curiosity. The reason I attend conferences is to listen to other people, to pick up what they’re thinking and talking about. So it’s broader than reading. It’s about being willing to listen to people and think about what they say. It’s about being curious and trying to learn. That’s what we try to instill in our people. The minute you quit being educated formally your brain power starts to shrink unless you educate yourself informally.”

4. Continuity of leadership
Some sort of panic, crash or credit crisis has struck the banking industry an average of once every decade going back to the Civil War. Yet, every time a crisis strikes, it catches bankers by surprise and leads to legions of bank failures.

The problem is that each new generation of banker has to re-learn the lessons of history. And these lessons are often learned the hard way.

This is why it’s important for banks to maintain institutional consciousness, passing lessons learned from the older generation of bankers down to the younger generation.

One bank that’s done this particularly well is First Financial Bankshares, the dominant locally owned bank in West Texas and one of the top-performing regional banks in the country over the past two decades.

There are a number of explanations for First Financial’s success during this time, which encompasses the financial crisis, but one is that its current chairman and CEO Scott Dueser lived through an acute banking crisis in Texas in the 1980s and is determined to avoid doing so again.

“The 1980s was this super education,” said Dueser. “I learned what not to do. And I learned how to get out of problem loans. I’m so glad I went through it because I remember it today and am not ever going to go through it again. And that’s why in the 90’s [and through the financial crisis] we did so well. That’s the value of having somebody like me in a bank that remembers. All these young guys, they don’t remember that. So how do you teach them? Well, you just tell them this is what happens when you do that.”

Two Traditional Strategies to Supercharge a Bank’s Growth


strategy-10-26-18.pngBankers would be excused for thinking right now that everything has changed in the industry and nothing is the same—that all of the old rules of banking should be thrown out, replaced by digital strategies catering to the next generation of customers.

There is some truth to this, of course, given how quickly customers have taken to depositing money and checking their account balances on their smartphones. Yet, banks should nevertheless think twice before throwing the proverbial baby out with the bathwater.

This is especially true when it comes to growth strategies.

Make no mistake about it, digital banking channels are thriving. At PNC Financial Services Group, two-thirds of customers are primarily digital, up from roughly a third of customers five years ago. And a quarter of sales at Bank of America Corp., the nation’s second biggest bank by assets, now come by way of its digital channels.

Yet, just because digital banking is transforming the way customers access financial products doesn’t logically mean that the old rules of banking no longer apply.

In a recent conversation with Bank Director, Tim Spence, the head of consumer banking at Fifth Third Bancorp, observed that digital channels are still not as effective as traditional mergers and acquisitions when it comes to moving into a new geographic market.

If a bank wants to grow at an accelerated rate, in other words, it shouldn’t cast aside the traditional method of doing so. This is why it’s valuable to continue learning from those who have safely and rapidly built banks over the past 30 years—as the barriers to interstate banking came down.

One approach is to wait for a downturn in the credit cycle to make acquisitions.

This strategy has been used repeatedly by $117 billion asset M&T Bank Corp., based in Buffalo, New York. In the most recent cycle, it acquired the largest independent bank in New Jersey, Hudson City Bancorp, as well as one of the nation’s preeminent trust businesses, Wilmington Trust—both at meaningful discounts to their book values.

Great Southern Bancorp, a $4.6 billion asset bank based in Springfield, Missouri, followed a similar strategy in the wake of the financial crisis. Through four FDIC-assisted transactions between 2009 and 2012, Great Southern transformed from a community bank based in southwestern Missouri into a regional bank operating in multiple states along the Mississippi and Missouri Rivers.

A second approach that has proven to be effective is to buy healthy banks in good times and then accelerate their growth.

Bank One did this to grow from the third largest bank in Columbus, Ohio, into the sixth largest bank in the country, at which point it was acquired by JPMorgan Chase & Co.

Its former chief executive officer, John B. McCoy, pioneered what he called the uncommon partnership: a non-confrontational, Warren Buffett-type approach to buying banks, where the acquired bank’s managers remain on board.

Another bank that has applied this acquisition philosophy is Glacier Bancorp, an $11.8 billion asset bank headquartered in Kalispell, Montana. Starting in 1987 under former CEO Michael “Mick” Blodnick, Glacier bought more than two dozen banks throughout the Rocky Mountain region.

Importantly, however, it wasn’t the assets acquired in the deals that helped Glacier grow from $700 million to $9.5 billion in assets in the 18 years Blodnick ran the bank. Rather, it was the subsequent growth of those banks post-acquisition that accounted for the majority of this ascent.

Glacier’s success in this regard boiled down to its model.

Today, it operates more than a dozen banks in cities and towns throughout the West as divisions of the holding company. These banks have retained their original names—First Security Bank, Big Sky Western Bank and Mountain West Bank, among others—as well as a significant amount of autonomy to make decisions locally.

Approaching acquisitions in this way has reduced the customer attrition that tends to follow a traditional acquisition and rebranding. At the same time, because these banks are now within a much larger organization, they have larger lending limits and access to new, often more profitable deposit products, allowing them to expand both sides of their balance sheets.

In short, while it’s true that the financial services industry is changing as a result of the proliferation of digital distribution channels, it isn’t true that these changes render the traditional growth strategies that have worked so well over the years obsolete.

2018 Technology Survey: Enhancing Board Know-How


tech-survey-8-27-18.pngTechnology and strategy are inextricably linked in today’s evolving digital economy. Unfortunately, bank boards—tasked with the oversight of the bank, including its long-term performance in a changing competitive environment—continue to struggle to wrap their hands around technological change and its implications. Seventy-nine percent of directors and executives say their board needs to enhance its level of technological expertise, according to the 2018 Technology Survey, sponsored by CDW.

Sixty-three percent indicate the board should better understand how to tie technology to bank strategy, and 60 percent say the board should better understand how the bank should invest in technology—a key concern, given rising budgets and an increasing number of technology vendors working with banks.

But the survey also indicates that directors have made strides in their focus on technology, both personally and as a board. Half say the board focuses on technology at every board meeting, up from 42 percent two years ago.

And the directors and executives participating in the survey indicate that they’re better users of their bank’s technology. More than three-quarters say they personally use their bank’s mobile and online channels, compared to 51 percent three years ago. With the onus on banks to enhance customers’ digital experience in the age of Amazon, a better understanding of digital through personal experience can only serve to improve these banks’ strategic direction.

The 2018 Technology Survey is comprised of the responses of 161 directors, chief executive officers, high-level technology executives and other senior executives at banks above $250 million in assets.

Additional Findings:

  • Sixty-five percent believe their bank has the products, services and delivery methods to meet the needs and demands of today’s customers.
  • Eighty-three percent say improving the user experience on digital channels is a goal for their bank over the next two years, followed by improving account onboarding (73 percent) and adding more features to the bank’s mobile app (71 percent).
  • Despite the buzz around Amazon’s Alexa, just 21 percent say integrating with that or a similar external platform is a near-term goal.
  • Forty-five percent say they plan to add more branches that will be smaller in size. Thirty-seven percent plan no changes to their bank’s branch footprint. More than half plan to update technology used in branches over the next two years, and 47 percent plan to add more technology in the branch. One-third plan to upgrade ATMs.
  • At least half of respondents indicate a need for significant improvement in their bank’s use of data analytics and business process automation.
  • Sixty percent indicate their bank has been increasing the number of staff focused on technology and innovation, and 55 percent have a high-level executive focused on innovation.
  • Sixty percent say their management team and board are open to working with newer technology startups. The typical bank, according to the survey, works with a median of seven technology vendors, including its core processor.
  • Sixty-one percent say their board has brought in relevant bank staff to better educate itself about technology. Twenty-nine percent have a board-level technology committee that regularly presents to the board.
  • Cybersecurity remains the top issue focused on by the board, at 93 percent.

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