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As I reach my 50th year in the banking business, I reflect on the changes made in the way we deliver banking to the American people. Many experts speak of a change in the branch system, which has largely been taken over by mobile banking. One lesson I have learned in the past five decades in this industry is that change comes very slowly but then quickly moves at the speed of light.
"Your technology does not have to be as good as the bank down the street; instead, it must be equal to the best in the market for all products"
For example, in early 2000, when I was serving on the Federal Reserve Board and next in line to be Chairman of The Independent Community Bankers of America (ICBA), the big question then was whether electronic payments (debit cards, ACH) would replace checks. For years, the Federal Reserve had been waiting for this to happen—it had all these Fed offices clearing checks and had even built new offices to assist with the volume. The general consensus among most in the industry was that the check would not be replaced for a long time. Fast forward only two years and the volume of checks written in the United States decreased at a very fast rate. All of a sudden the Fed started merging check clearing offices due to decreased volume.
I illustrate this point because the world of the CIO of any banking company is pretty much the same today. It does not matter how far ahead of the curve you are; it’s likely that the information systems you are using today will be obsolete within three to five years. This is a true pressure point on all parts of our industry and America as a whole. We’re all trying to keep up with these rapid changes. As an example, students entering a major university this year will be leaning on systems that might not be workable when they graduate. Just look at what is happening in the restaurant industry with order and delivery apps on our phones and computers. An owner of a local restaurant chain told me that he is starting to sell more out of the back door of his locations than the front door. This is a true indication that any restaurant that is not utilizing these apps may not be able to compete for very long. Even major retail stores like Macy’s, Sears and Walmart have redone their entire selling platform to adapt to the selling pressure from the internet. Regardless of the industry, the CIO is becoming one of the most important people on the executive committee. If your company is not focused on the fast-changing world of technology, you need to regroup and redirect your priorities quickly.
This, of course, adds to the level of scrutiny you will face due to the level of increased security that is required as you expand your business into the wide world of technology. The senior management and board of every bank must examine the risk management of each new product they offer to make sure it is secure. Companies must expect a breach of their system or a government regulator finding them out of compliance with its rules and regulations, which is why it’s critical to know the risks involved and how to mitigate those risks quickly and effectively. A strong audit and tech support team in your company is a must to help prevent cybercrime and fraud against your company. The price you pay to compete is substantial—just ask the companies that have had major data breaches about the cost of fixing them and repairing their brand—but in the long run you cannot afford to not have the best risk management in place.
These are major change in the way companies do business, and no one can tell us where we are heading any more than people could when the industrial revolution started. If you think anyone can tell you how to prepare for the future, just let me mention that my mother who is 99 years old has seen the inventions of—or changes to—automobiles, movies (talking and color), radio, photography, airplanes, television, computers, cell phones, I-Pads, and the internet, just to name a few. If you are sitting back and thinking that your company will not be affected, just think about the businesses that have been replaced or have had to make major changes to compete or stay alive.
The future of the world is very exciting, and CIOs have now become profit centers for banks by guiding them in how to introduce new products and increase the use of existing products the company offers or sells. Your products will be compared to not only other banks but offerings by new Fin-tech companies, as well as every other app or product they can acquire. Your technology does not have to be as good as the bank down the street; instead, it must be equal to the best in the market for all products. So the question is not the future of the branch or your delivery system but the future of the payment system and how commerce is handled ten years from now. As I have said many times, this is a gamble that every company has to make on the future of its ability to survive and prosper.
The winner in this race will reap big rewards, and the loser will be looking for a new job or a new career.