Financial Research: Grappling with Technology

Bank leaders want to know more about how to leverage technology to make their institutions more profitable, but don’t know where to start, reveals the 2014 Growth Strategy Survey. Bank Director and CDW surveyed 145 independent directors and executives in June and July to uncover technology’s role in growth strategy.

Growth-Survey-Group-1Bank leaders know that technology can make their banks more efficient, and know that customer demands are only growing. But less than one-third talk about technology at every board meeting, and one-quarter of banks lack the IT staff to grow the bank.

Growth-Survey-Group-4When asked about the top technology concerns for their banks, keeping up with the evolution of mobile banking is a concern for more than half. Data analytics is also top of mind, and the survey finds that big banks are better users of data. Forty percent of respondents overall use business intelligence tools and analytics within their organization, but more than three-quarters of banks over $5 billion in assets currently use data to support growth goals.

Growth-Survey-Group-2One-third are concerned that the bank’s core processor impedes the bank’s ability to innovate. Community banks in particular depend on vendors for their technological expertise, yet half say that their core processor is slow to respond to innovations.

Growth-Survey-Group-3It’s important to note that many of these concerns about innovation and the use of data tie into growing concerns about competition from outside the industry. Eighty-four percent of respondents say that today’s highly competitive environment is their greatest challenge when it comes to growing the bank, and 83 percent worry about nonbank competitors. Banks above $5 billion in assets reveal a heightened concern about PayPal and Amazon.

Full survey results are available online at BankDirector.com.

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The Power of ‘No’

The Wall Street Journal has a great piece on the growing prominence of chief risk officers: “After Crisis, Risk Officers Gain More Clout at Banks”. According to the piece, risk officers now have more say and are earning more for it, as much as 40 percent more than just a few years ago. Our recent research supports this:

Perhaps due to the increased prominence of the CRO, many bank boards feel that they can breathe a little easier when it comes to matters of compliance and risk management. In the 2014 Compensation Survey, we asked about the top compensation-related challenges that face bank boards today. Just over the course of the last year, the percentage that indicate that understanding and complying with regulations poses a challenge fell dramatically, from 41 percent in 2013 to 22 percent this year, a drop of almost 50 percent.

It should be noted that the decline in bank boards concerned about compliance was not as pronounced among banks with more than $5 billion in assets (though there was still a significant drop, of 16 percent). But perhaps this isn’t surprising, as the regulatory focus falls more on these banks as they approach the $10 billion threshold laid down in the Dodd-Frank Act – so the focus on risk will always be more heightened at these organizations.

Risk culture, and the board’s role in it, still has a ways to go. Less than half of bank boards regularly meet with their chief risk officer, so not every CRO has a seat at the table. But for many financial institutions, risk officers are gaining more prominence and playing a greater role in the strategic direction of the bank.

TopCompChallengesSources:

  1. 2014 Compensation Survey
  2. 2014 Risk Practices Survey
  3. “Handling Risk in the Modern Age”, Bank Director, 2nd quarter 2014

More Competition in The Midwest?

What are the most competitive markets for the banking industry? Two recent rankings may provide some clues.

affordable banking

Infographic provided by GOBankingRates.com. Click here for their story on the best and worst states for affordable banking.

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Where’s the Risk?

With the Target data breach being just the latest example of how cyber criminals will find a way to hack into consumer data, bank boards are putting more focus on cyber crime.

WheresRiskInfographThe above infographic cites the results of the 2013 Bank Board & Executive Survey.

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Do Consumers want Mobile AND Local?

xAD, a New-York based mobile advertising network and Telmetrics, a Canadian-based call measurement provider, released results to a study late last month detailing the “path to purchase” for mobile consumers. Nielsen conducted the online survey of more than 2,000 U.S. smartphone and tablet users. Results specific to the banking industry won’t be available until September, but the infographic below details some interesting trends related to the banking industry, namely:

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