While Elon Musk is making some raving fans and many others nervous slamming through the Beltway, I’m reminded of a famous quote of his that truly hits home in today’s banking industry:
People always think technology just automatically gets better every year, but it actually doesn’t. It only gets better if smart people work like crazy to make it better. By itself, technology will actually decline if people don’t work on it.
Banks today are throwing lots of money at technology because they have no choice. National banks, fintechs, and big tech are driving competitive pressure for leaders to go big with digital, data, automation, and now generative and agentic AI. Unfortunately, most banks are missing big time on Musk’s “smart people working like crazy to make it better” mantra. It’s time for “Smarter Banks” to drive the rigor that results in a stronger technology ROI than today’s unimpressive performance.
Stories abound in our industry about new digital applications, CRM platforms, and loan origination systems being deployed where business outcomes failed to meet the faithful expectations of executives. This failure occurs because the hard work of connecting tech investments to business outcomes is neither demanded nor visible to senior management, and the organizational changes necessary to make new technology hum are often done in a halfhearted manner.
Our firm is seeing leading financial institutions taking new approaches to break away from the mediocre tech deployments and suspect investment returns seen in the banking industry. Here are some key aspects of the Smarter Bank Technology ROI Playbook:
Technology is overtaking facilities costs as the second-most significant operating expense in our industry next to employee costs. Sadly, most bank leaders cannot present a clear, aggregated view of their tech spending and how this investment compares to peers. As banks scale and compete with innovating financial companies, the risk of flying blind on technology spending will continue to grow and undermine value creation. Smarter Banks not only measure their tech spending but also work to reduce commoditized legacy costs while intentionally redirecting spending to transform the business.
While bank executives talk the talk about demanding business cases to justify new investments, we find that less than half of banks have a consistent business case format and process used to support the rigor of their new technology. Often this process can become overly bureaucratized by a bank’s Project Management Office or Finance team and gains little traction. Instead, leadership can keep the business case format simple and challenge managers wanting to spend the bank’s money with key questions:
Banks often think every tech investment needs a pure financial ROI measure, but any finance geek can fabricate a 30% internal rate of return with an Excel spreadsheet. Instead, business cases should focus on quantitative metrics (e.g., increased revenue per card, improved productivity per underwriter) and competitive metrics that define a new organizational capability (e.g., reduced small business loan closing to 72 hours). The critical aspect of ROI metrics is keeping them visible at the leadership level to apply healthy pressure for their achievement.
Smarter Banks don’t just buy technology, they ensure that formal roles to achieve an ROI are clear with players like systems administrators, business analysts, developers, and power users to evangelize the system and train team members. One sign of a high-performing bank is its ability to make people synonymous with the critical system that drives the organization. Smarter Banks also build road maps that show planned process and system improvements with clear deadlines – essentially bringing a disciplined software release mindset to the operating model of the bank.
While leaders clearly understand that deploying new technology is a “cheese-moving” moment for the organization, most organizations put insufficient work into defining the human systems that must be modified for success. One midsize bank spent $7 million over five years for a new loan origination system but failed to demand that loan officers maintain accurate data in the system. At the same time, the loan operations group continued to require checklists and email-based information exchanges outside of the expensive enterprise system. When this vendor contract was coming up for renewal, the CEO saw no justification to continue. Smarter Banks take the time to force new processes, behaviors, and accountabilities that breathe life into systems investments – and they don’t allow exceptions for those dying for the “good ol’ days.”
Make the Investment Look-Back Simple But Somewhat Brutal
Good news! A very sophisticated technology has been developed to help leaders review and “look back” on their bank’s technology investments. It’s called the Microsoft Outlook calendar function. Here’s how a simple process can work. Assign a smart analyst in Finance to set an appointment for a look-back review one year after a tech initiative receives budget money. One year later, the unbiased analyst can meet with the business to see how well both quantitative and competitive metrics were achieved as promised and report back to the bank’s technology steering committee. The bank’s technology steering committee should apply rigorous pressure on managers to ensure ROI goals are hit. This practice is everywhere in other industries but very rare in banking.
Bank executives, ask yourself this simple question: “Who are the smart people working the technology that I’ve spent tens of millions of dollars of investment on in recent years?” I bet there’s room for improvement. It’s not just more technology, but the organization’s push with new technology to specific business outcomes. Let’s go!
Steve Williams is a founder and chief executive officer of Cornerstone Advisors. Tune in to Steve’s Plugged In podcast and follow him on LinkedIn and X.