Seeing the Future in Technology

thePoint
June 3, 2005

Many of those people who indulge in crystal-ball gazing proclaim to clearly see the future of banking technology. The folks who handle this task at Celent Communications tend to do so with a dash more practicality than most. A case in point is a white paper by Alenka Grealish, manager of Celent's banking group, titled "Banking Trends in 2005 that Will Make a Difference".

She starts out in no-nonsense fashion. "Given the cutthroat nature of bank competition, targeted technology investments with measurable [return on investment] can provide solid opportunities for them," she states. She sees a 4% increase in information technology spending by banks in 2005, compared with 2004, reaching $38.5 billion.

Grealish discusses seven trends to keep an eye on this year:

1. A new paradigm for multichannel integration and customer relationship management. "Pioneering institutions are coming very close to providing real-time and sales-focused customer information that enables customer service representatives to deliver personalized service."

2. Branches as stores. "Banks will soon feel pressure, if they don't already, to produce more from their branch networks, especially because they've saturated certain markets and face excess capacity issues."

3. A sea of change in payments. "Innovative, multichannel payments will continue to grow on the retail side (e.g., person-to-person and proximity payments in the U.S. and contactless payments in Asia). There will be a gradual push for e-payment adoption in business-to-business transactions."

4. Further investment in check imaging. "Although payback in check imaging will likely not yet happen in 2005, more institutions recognize they need to adopt imaging or else they'll be left behind processing expensive paper while others enjoy the benefits of image exchange."

5. Heightened attention to security and fraud control. "Several factors include increasing exposure across virtual channels (phishing and identity theft), increasing concern regarding regulatory compliance, vulnerability created by check imaging and Check 21, and continuing attacks against cards."

6. Small business Internet banking no longer generic. "The price/performance of small business-oriented online banking has improved notably over the past five years, ushering in tailor-made features and functionalities."

7. Moving beyond cash management to the entire financial supply chain. "The future livelihood of cash management and treasury banks lies beyond the payment piece: upstream, they must focus on adding value in the order/invoice states; and downstream, they need to offer better price/performance in the reconciliation stage of a business-to-business transaction."

This article was prepared by the staff at the Point for Credit Union Research and Advice and is published online at http://thepoint.cuna.org/. Reprinted with permission.