“When wireless first became available, the industry may have been overly optimistic.”
– Wells Fargo spokeswoman
I was reading an article in American Banker this week on the slump in wireless usage in the banking industry. The article, titled “Toughing Out Wireless Slump, 724 Touts ‘Alerts’”, reports that many of the big name banks, such as Bank of America and Wells Fargo, have shelved their plans to deploy financial services on wireless devices. (In case you have been visiting another planet, this is called mBanking, which stands for mobile banking.)
The concept goes something like this: “Let’s get banking customers to use their cell phones or PDAs to conduct banking while driving or shopping at the mall. Let’s forget about displays that cannot be read in any lighting and keyboards that are usable only if your fingertips are the size of a pencil lead. And let’s ignore transmission capacities that make growing grass seem a speedy enterprise.”
Looking back, it’s clear that this wireless “thing” was a lot of fluff looking for the killer application. A spokeswoman for Wells Fargo made this classic understatement, “When wireless first became available, the industry may have been overly optimistic.”
Even the supposedly knowledgeable research firms were on their soap boxes about this. IDC in a press release dated June 5, 2001, said, “We recommend they [banks] enter mobile business as soon as possible…” IDC went on to provide information on high adoption rates and billions in investment expected to be made over the next few years.
This is not a new phenomenon. Excessive Optimism has plagued the banking industry and its use of technology for a long time. When the first ATMs were deployed, the industry believed there would be no live tellers within five years. And while ATMs have cropped up on almost every corner and in many retail establishments, the last time I was in my bank, there were still a lot of tellers helping customers.
Remember the automated loan kiosk? A user-friendly computer was going to replace your bank’s loan officer. It was going to do for banking what display merchandise does for eager buyers. Kiosks were to be deployed in shopping malls where eager borrowers would slap their heads and say, “Wow! I can get a $300 loan and buy that gift for my wife!” A kiosk in a mall always seemed to me like a strange place to disclose my personal financial information. I’m not entirely sure of my facts, but I believe the concept-to-death lifespan of that idea was less than three years.
Our research at Cornerstone indicates a bank only spends about 10 percent of its technology dollars for new strategic initiatives. Amazingly, the other 90 percent is spent on tactical, day-to-day expenses, support of existing strategic initiatives, and things that do not differentiate the bank from its competitors. Let’s see if my math is correct. According to our mid-size bank study, the typical bank annually spends .266 percent of average assets for technology. That means .0266 percent of average assets is for NEW strategic spending each year! This translates to “I don’t have much to spend, and I need to spend it very carefully.”
So here are my Top 10 Rules for Determining Whether a New Technology Deserves Your Strategic Technology Dollars:
1. Listen to your customers.
Are they saying they can’t live without it? If your customers are not asking for it, it is doubtful you can make them want it. Think about Internet banking, now that the hype has worn off.
2. Look at what your peers and the national banks are doing.
Are they making major investments in the technology? If they are moving into the technology, it deserves a closer look. National banks tend to lead the industry in technical innovation and are willing and able to make the large R&D investments to bring to market new ideas. Watch closely — but don’t get too eager until products are available that bring the cost down.
3. Investigate the financials of the companies providing the technology.
Would your top commercial lender approve a large credit for the company providing this technology?
4. Watch the credit unions.
Credit unions typically spend more than banks for technology and often deploy new technologies two or more years before the banking industry. Does it work there? How well has it been adopted? How are they pricing it?
5. Determine whether the technology supports your specific strategic goals.
If the technology is for retail and your bank is primarily commercial, fuhgidaboudit.
6. Ask the IT byte heads what they think.
Find out if the technology fits into your current systems. Can it be easily integrated? At what cost?
7. Build a business case for the technology.
Is the business case based on hard revenue and costs, or are they soft? Can a mere mortal understand the business case, and can it be made on a single page?
8. Look at other industries that are using the technology.
How well does it work for them? Is it for their customers or their employees? Do they make money with it?
9. Decide whether you would use this technology yourself.
It always amazes me how often a new technology is not used by the bank employees.
10. Poll your spouse.
One of my most successful clients uses the Spousal Acid Test and claims it has resulted in the cancellation of many an inane technical project. His bank is very profitable, so there must be some merit to this.
The next time someone in your bank comes up with the next best way to spend some of your limited technical capital, pull out this list. I think it will help you make an informed decision.