Observations and musings from producing 2009 Bankers As Buyers
Bankers as Buyers(tm) is a collection of research, observations and articles about what technology, solutions and services bankers will buy in 2009 and the changing financial industry landscape.
The full 2009 Bankers As Buyers study can be downloaded at:
http://www.williammills.com/images/pdfs/bab%202009%20final.pdf
This blog entry is about 1,200 words...down from the full report's 40 pages.
According to Federal Deposit Insurance Corporation (June 2008 data) and Credit Union National Association (November 2008 data), the depository institution landscape is as follows:
Commercial Banks 7,146
Savings Banks 1,238
Credit Unions 8,064
Total 16,448
For the FDIC bank profile, see: http://www.blogger.com/img/blank.gif
Overall, Financial Insights is predicting a reduction in IT spending for North American banking. This will mark the first time Financial Insights has forecast negative growth for the industry since before the company and its predecessor firm started forecasting IT spending in the mid-1990s, according to Jeanne Capachin, research vice president, global banking, for Financial Insights.
By segment, TowerGroup predicts technology spending in banking to stay flat in 2009, with insurance and capital market segments down 6.2 and 8.3 percent respectively.
Such predictions indicate that 2009 will be one of the most challenging years facing bankers and the companies that provide financial industry products and services. Yet, despite ongoing concerns in the industry, the survey indicated definite areas where technology spending is expected to grow this year.
Interest in mobile banking applications remains red hot
Mobile banking was consistently referenced by sources and in studies as a channel that will see significant growth in 2009 and beyond. We’ve seen how mobile phones can be used as a self-service device, say to check balances. In 2009 and beyond, we’ll see more mobile payments and mobile marketing.
TowerGroup estimates that every month through the first quarter of 2009, between 150 and 300 banks and credit unions in the U.S. will sign contracts for mobile banking solutions.
According to recent Aite Group research, almost half of current mobile financial service users (45 percent) are likely to subscribe to a mobile data plan by the end of 2009.
Richard Crone of Crone Consulting LLC, sees continued growth in spending on mobile applications because they can bring financial institutions new customers and new revenue streams, which are in high demand with net interest revenue expected to be tight until the economy starts to turn around. “By providing mobile-friendly applications and by communicating with customers via e-mails, text messaging and phone calls to mobile devices, financial institutions will grow a loyal customer base,” Crone added.
Security is a driver for spending
The Independent Community Bankers of America 2008 Technology Survey revealed that 81 percent of respondents listed personal information security as their top priority for long-term technology.
The full report can be found at: http://www.icba.org/files/ICBASites/PDFs/2008techsurvey.pdf
According to the McAfee Virtual Criminology Report for 2008, “Cybercriminals are cashing in on the fact that the economic downturn is causing people worldwide to increasingly turn to the Web to seek the best deals, jobs and to manage their finances. They are preying on fear and uncertainty and taking advantage of the fact that consumers are often more easily duped and distracted during difficult times. In fact, opportunities to attack are on the rise.”
Javelin Strategy & Research indicated that the average ID fraud currently costs $5,574 per victim and takes 26 hours to resolve. “Most of the focus will be on information management – fraud, Bank Secrecy Act, compliance and those types of systems,” said Terrence Roche of Cornerstone Advisors.
Bankers are more open to outsourcing
If bankers can save money by having other companies safely run applications or take over data centers, they will sit up and listen. “Banks are increasingly favoring outsourcing and the SaaS model as opposed to software licensing requiring capital expenditures,” said Aite Group analyst Gwenn Bezard.
According to Virginia Garcia, senior research director for TowerGroup, “We expect SaaS to grow through 2009 and 10. There is a marked shift from installed technology to using Software as a Service.”
Capachin said that financial institutions are increasingly seeking to remove non-essential staff, including much of the IT department. She added that SaaS investments started growing more quickly in the second half of 2008, a trend she expects to continue in 2009.
Consolidation will mean more money spent on system conversion and integration
Systems integration spending is another area of concern as a result of consolidations of larger financial institutions. Acquisitions and consolidation of platforms will take precedence over any other new technology spending, Garcia said.
According to an Aite Group survey, banks are already struggling to meet the compliance burden with their current technology.
Regulatory pressure, compliance and using analytical tools to improve reporting may drive an increase in spending
Regulatory spending is one area that is a “have to have” not a “nice to have” area of spending. We will surely see more regulation and compliance initiatives in the second half of 2009. According to Jimmy Sawyers, partner, Securas Consulting Group, LLC, banks have most of the technology already to address new demands, but will need help pulling the information together.
Terrence Roche, principal with Cornerstone Advisors, indicated that regulators will want quick and thorough access to detailed information to ensure that financial institutions are meeting transparency and other regulatory guidelines.
According to Christine Barry, research director for Aite Group, the largest banks need to have the right analytical tools in place to better evaluate creditworthiness and predictability. Now it is more important than ever for banks to lower their risk.
“Better analytical tools will help financial institutions increase their collections,” says Capachin. “Good analytics can help a financial institution determine which outstanding accounts will result in the best returns.”
Community banks and credit unions are seeing some growth
The survey highlighted resurgence among community banks because they did not participate in exotic loan products. An ICBA study reveals that 70 percent of community banks saw an uptick in deposits within the past 12 months and that 11.6 percent experienced a rise in new interest checking accounts in the third quarter of 2008.
According to an American Banker article, credit unions now have a 4.5 percent share of mortgages compared to two percent just five years ago.
Jimmy Sawyers said, “Community banks are a lot more nimble.” He added that as the cost of technology continues to come down, he expects smaller financial institutions to take advantage of customers’ renewed interest in community banks by installing systems that enable customers to access account information via telephony and online systems.
These institutions are focusing their technology spending on customer service and self-service technologies to take advantage of customers’ increased interest in doing business with local financial institutions.
In closing, while low projected technology spending in 2009 will make the environment much more competitive for vendors, the good news is that pricing will be better for financial institutions. This industry spends more on technology than most industries – billions and billions of dollars per year.
Selling to financial institutions in 2009 will require sales organizations to be very aggressive and show a quick return on investment; marketers will need to help create more leads and help companies uniquely position themselves against the competition; and companies will have to demonstrate a “Ritz-Carlton-” level of customer service to retain business.
END
Featured articles in the study include:
“Vendor Strategies in the Financial Services Sector” by Jeanne Capachin, Financial Insights, an IDC Company
“Credit Unions: Time to Optimize Your Delivery Strategy” by Richard Crone, Crone Consulting, LLC
“Top Ten Trends Impacting Bank Technology for 2009” by Jimmy Sawyers, Securas Consulting Group, LLC
“Redefining the Value Experience in Banking” by Dennis Roman, TCS Financial Solutions
The full 2009 Bankers As Buyers study can be downloaded at:
http://www.williammills.com/images/pdfs/bab%202009%20final.pdf
This blog entry is about 1,200 words...down from the full report's 40 pages.
According to Federal Deposit Insurance Corporation (June 2008 data) and Credit Union National Association (November 2008 data), the depository institution landscape is as follows:
Commercial Banks 7,146
Savings Banks 1,238
Credit Unions 8,064
Total 16,448
For the FDIC bank profile, see: http://www.blogger.com/img/blank.gif
Overall, Financial Insights is predicting a reduction in IT spending for North American banking. This will mark the first time Financial Insights has forecast negative growth for the industry since before the company and its predecessor firm started forecasting IT spending in the mid-1990s, according to Jeanne Capachin, research vice president, global banking, for Financial Insights.
By segment, TowerGroup predicts technology spending in banking to stay flat in 2009, with insurance and capital market segments down 6.2 and 8.3 percent respectively.
Such predictions indicate that 2009 will be one of the most challenging years facing bankers and the companies that provide financial industry products and services. Yet, despite ongoing concerns in the industry, the survey indicated definite areas where technology spending is expected to grow this year.
Interest in mobile banking applications remains red hot
Mobile banking was consistently referenced by sources and in studies as a channel that will see significant growth in 2009 and beyond. We’ve seen how mobile phones can be used as a self-service device, say to check balances. In 2009 and beyond, we’ll see more mobile payments and mobile marketing.
TowerGroup estimates that every month through the first quarter of 2009, between 150 and 300 banks and credit unions in the U.S. will sign contracts for mobile banking solutions.
According to recent Aite Group research, almost half of current mobile financial service users (45 percent) are likely to subscribe to a mobile data plan by the end of 2009.
Richard Crone of Crone Consulting LLC, sees continued growth in spending on mobile applications because they can bring financial institutions new customers and new revenue streams, which are in high demand with net interest revenue expected to be tight until the economy starts to turn around. “By providing mobile-friendly applications and by communicating with customers via e-mails, text messaging and phone calls to mobile devices, financial institutions will grow a loyal customer base,” Crone added.
Security is a driver for spending
The Independent Community Bankers of America 2008 Technology Survey revealed that 81 percent of respondents listed personal information security as their top priority for long-term technology.
The full report can be found at: http://www.icba.org/files/ICBASites/PDFs/2008techsurvey.pdf
According to the McAfee Virtual Criminology Report for 2008, “Cybercriminals are cashing in on the fact that the economic downturn is causing people worldwide to increasingly turn to the Web to seek the best deals, jobs and to manage their finances. They are preying on fear and uncertainty and taking advantage of the fact that consumers are often more easily duped and distracted during difficult times. In fact, opportunities to attack are on the rise.”
Javelin Strategy & Research indicated that the average ID fraud currently costs $5,574 per victim and takes 26 hours to resolve. “Most of the focus will be on information management – fraud, Bank Secrecy Act, compliance and those types of systems,” said Terrence Roche of Cornerstone Advisors.
Bankers are more open to outsourcing
If bankers can save money by having other companies safely run applications or take over data centers, they will sit up and listen. “Banks are increasingly favoring outsourcing and the SaaS model as opposed to software licensing requiring capital expenditures,” said Aite Group analyst Gwenn Bezard.
According to Virginia Garcia, senior research director for TowerGroup, “We expect SaaS to grow through 2009 and 10. There is a marked shift from installed technology to using Software as a Service.”
Capachin said that financial institutions are increasingly seeking to remove non-essential staff, including much of the IT department. She added that SaaS investments started growing more quickly in the second half of 2008, a trend she expects to continue in 2009.
Consolidation will mean more money spent on system conversion and integration
Systems integration spending is another area of concern as a result of consolidations of larger financial institutions. Acquisitions and consolidation of platforms will take precedence over any other new technology spending, Garcia said.
According to an Aite Group survey, banks are already struggling to meet the compliance burden with their current technology.
Regulatory pressure, compliance and using analytical tools to improve reporting may drive an increase in spending
Regulatory spending is one area that is a “have to have” not a “nice to have” area of spending. We will surely see more regulation and compliance initiatives in the second half of 2009. According to Jimmy Sawyers, partner, Securas Consulting Group, LLC, banks have most of the technology already to address new demands, but will need help pulling the information together.
Terrence Roche, principal with Cornerstone Advisors, indicated that regulators will want quick and thorough access to detailed information to ensure that financial institutions are meeting transparency and other regulatory guidelines.
According to Christine Barry, research director for Aite Group, the largest banks need to have the right analytical tools in place to better evaluate creditworthiness and predictability. Now it is more important than ever for banks to lower their risk.
“Better analytical tools will help financial institutions increase their collections,” says Capachin. “Good analytics can help a financial institution determine which outstanding accounts will result in the best returns.”
Community banks and credit unions are seeing some growth
The survey highlighted resurgence among community banks because they did not participate in exotic loan products. An ICBA study reveals that 70 percent of community banks saw an uptick in deposits within the past 12 months and that 11.6 percent experienced a rise in new interest checking accounts in the third quarter of 2008.
According to an American Banker article, credit unions now have a 4.5 percent share of mortgages compared to two percent just five years ago.
Jimmy Sawyers said, “Community banks are a lot more nimble.” He added that as the cost of technology continues to come down, he expects smaller financial institutions to take advantage of customers’ renewed interest in community banks by installing systems that enable customers to access account information via telephony and online systems.
These institutions are focusing their technology spending on customer service and self-service technologies to take advantage of customers’ increased interest in doing business with local financial institutions.
In closing, while low projected technology spending in 2009 will make the environment much more competitive for vendors, the good news is that pricing will be better for financial institutions. This industry spends more on technology than most industries – billions and billions of dollars per year.
Selling to financial institutions in 2009 will require sales organizations to be very aggressive and show a quick return on investment; marketers will need to help create more leads and help companies uniquely position themselves against the competition; and companies will have to demonstrate a “Ritz-Carlton-” level of customer service to retain business.
END
Featured articles in the study include:
“Vendor Strategies in the Financial Services Sector” by Jeanne Capachin, Financial Insights, an IDC Company
“Credit Unions: Time to Optimize Your Delivery Strategy” by Richard Crone, Crone Consulting, LLC
“Top Ten Trends Impacting Bank Technology for 2009” by Jimmy Sawyers, Securas Consulting Group, LLC
“Redefining the Value Experience in Banking” by Dennis Roman, TCS Financial Solutions
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