Consider new technologies for old banking problems Part 2
In the May/June issue of Financial Institution Insights , Part 1 of this series discussed how emerging technologies can have special benefits for community banks. When careful analysis is done to find the right solution for a specific application, the new technologies can provide community banks with a competitive advantage. Implemented effectively, they can increase operational efficiencies and optimize the bank's internal processes and delivery of customer services. Other new technologies can serve to secure the integrity of systems and safeguard private information.
Yet despite their proven advantages, many community banks are not utilizing these solutions or are only partially using them. So given their critical role and often unexplored benefits in the community banking sector, Bank Notes is doing a two-part series on emerging technologies. In the May/June issue, we discussed the following four topics:
- Business intelligence
- Customer relationship management
- Social networking & social media
- Mobility and management
In this issue of Bank Notes, we'll be discussing the following four areas:
- Desktop virtualization
- Document management & process automation
- Data loss prevention
- Teller capture
The organizational reality check
First, let's review the basic analytical framework for evaluating new technologies. This was outlined in Part 1 of our series, but it's worth revisiting. The process starts with a technology investment analysis that examines your bank's information technology (IT) environment, business needs, current technologies and ownership issues. A methodical approach will help ensure that the investments are strategic and support your organization's business plan, as well as solve your existing systems problems.
The IT capability model (pictured below) shows five different stages of maturity with respect to the management of systems and information – from initial (reactive and problem-driven) to repeatable (keep the status quo) to defined (stable with some controls) to well-managed (proactive and well-monitored) to optimized (mastery and leadership). If your bank is not in the latter two categories, then it's essential that you undertake an evaluation of your systems and processes and create a three to five year technology roadmap to help guide your investment decisions.
Identify relevant technologies
Once you have assessed your existing infrastructure and related processes, the next step is to identify technology improvement opportunities that would meet your current and anticipated business needs. Once completed, the technology plan will serve as a roadmap for future IT purchases. It is important to note that the technologies you identify today may not result in an investment this year or next – sometimes they are part of a longer-term plan that includes upgrades that will take place over a number of years. This means you should not expect to see immediate results. Over time, you'll see that purchase decisions line up with the business requirements plan, resulting in a reduction in the overall cost of technology ownership.
Now, let's turn to our four new solutions.
Virtualization is a software solution that enables multiple computers to run on the same hardware device, fully isolated from one another, as if they were running as separate computers. Most community banks begin the virtualization process with servers. It is important to realize that the server virtualization mindset focuses on CapEx reduction, whereas much of the value associated with desktop virtualization lies with OpEx reduction, which, as revealed below, is primarily associated with IT related operational and support efficiencies.
Virtualization is clearly catching on. According to "2012: Virtual desktops are all the rage" in NetworkWorld.com, Dec. 22, 2011, Gartner says that 40 percent of servers overall have been virtualized, but that is predicted to grow to 75 percent by 2015. Here are some ways that desktop virtualization improves operational efficiencies:
- Allows management of physical and virtual desktops from a single console
- Leads to higher availability, security and improved business continuity of desktops in the datacenter
- Extends the life of existing personal computer hardware
- Allows for the use of thin client hardware terminals
- Gives bank the ability to provide secure remote access to mobile users
Despite these benefits, desktop virtualization may not be the best fit for some banks. Whether it does or not depends on the type and mix of applications, total number of users and other factors. In fact, a number of community banks find that Presentation Virtualization, which many may recognize as Citrix Presentation Server or XenApp, is a better fit.
Both solutions offer similar benefits, but a number of factors unique to each bank will determine which one is the best fit. To find the right answer, banks should review the solutions vis-à-vis the existing technology framework, as well as review current and anticipated business needs and objectives. Once identified, the solution should then undergo a proof of concept (pilot) exercise prior to full deployment.
Document management & process automation
Intranet solutions are commonly used by community banks for informational content and file storage, but the solution tends to be lacking in key capabilities and features, such as content search, document management and electronic forms. Yet a good intranet solution should contain up-to-date information and integrate documents, content and processes. It should also provide operational efficiencies through workflow and automation, should be easy to modify and should not require dependence on IT for administration.
Some may be surprised to learn that nearly every community bank is licensed to use the free version of Microsoft SharePoint, which is bundled with Microsoft Windows Server, and which possesses the operational improvement capabilities mentioned above. Though outsourced expertise may be initially required to establish the framework and to implement knowledge transfer, community banks should still come out ahead cost-wise; for example, by taking full advantage of the included version of SharePoint, they can better leverage their investment in Microsoft Windows Server.
Following are some of the many advantages of this solution for community banks:
- Fully integrates with Microsoft Office Suite
- Leverages Microsoft Outlook for notifications
- Reduces email traffic and stores unstructured content
- Integrates transactions and systems
- Integrates links to supporting documents
- Enhances internal document search capabilities
- Eliminates the routing and storage of paper documents
- Enables business process automation through workflow
Below are a few examples of the numerous process automation and workflow uses that have been implemented by community banks:
- Automation of board packets
- Employee on-boarding or termination
- Purchase order request
- Expense report submission and approval
- Document version control (e.g. policies, procedures, etc.)
- Document retention administration
- Vendor management
- Change management
Data loss prevention
Pick up any banking industry publication these days, and you'll see references to the growing and rapidly morphing cybercriminal underworld. According to Gartner Predicts 2012, "Through 2016, the financial impact of cybercrime will grow 10 percent per year, due to the continuing discovery of new vulnerabilities." And according to the Ponemon Institute's 2010 data breach study, "The total number of personally identifying information records exposed increased by 1084 percent from 2005 to 2010."
Hackers are evolving with the times and targeting new technologies with the same zeal once reserved for hard drive hacking. Their goal is to find security gaps in things like mobile apps or social media, perhaps because they believe that the bank's security will be minimal for newer technologies. Due to these ever mutating threats, banks should continue to place data loss prevention (DLP) high on its agenda of security strategies.
DLP is a system of security tools used to recognize and identify critical data and ensure it is protected from unauthorized users. Such a system typically monitors and inspects the following:
- Data in use (being printed)
- Data in motion (being transmitted)
- Data at rest (stored)
The intelligence of today's leading solutions goes beyond simple monitoring and inspection to collectively accounting for a user's role, identity and involvement, as well as content and context analysis. The result is a multi-dimensional process that improves the security system's ability to identify threats and prevent the exposure of personally identifiable information across systems and users.
Most banks exercise at least minimal DLP processes, such as access control to applications and other resources. However, these are often not enough to prevent data loss across all venues such as through email, external drives and printers.
It is important to realize that the costs associated with a comprehensive DLP solution go beyond hardware, software and implementation. Such a system will require that time and effort be spent for upkeep, maintenance and administration, the amount of which increases in correlation with the degree of complexity of the technical environment and overall size of the institution.
Teller capture has achieved only limited adoption in the banking industry, mostly in technologically advanced and progressive institutions. Among other banks, there appear to be wide-spread concerns over implementation costs (scanners and software) and the perceived risk of slower customer service. Actually, there are several options available with teller capture that can help prevent slower customer service. Banks also need to create a business case for benefits that can be achieved through use of teller capture. This business case should evaluate the benefits of branch capture through an existing back office solution, compared to those that can be achieved through teller capture (front office solution).
Some of the key teller capture benefits include:
- Reduced operating costs
- Improved customer experience
- Improved teller experience
- Reduced keystrokes and time to process transactions
- Reduced transportation expenses
- Errors identified and corrected upfront
- Support for additional image clearing benefits
- Improved fraud identification and prevention
- Improved sales and revenue generation from the branch
While some of these benefits are available with back counter capture, the complete list is only possible with a full teller capture implementation. Teller capture is only viable if it is integrated with your teller solution. As enhanced technology is developed for financial institutions, teller capture should be given prime consideration. It's worth noting that AmericanBanker.com believes that teller capture is here to stay. Discussing predictions for branch technology in "Where the IT Dollars Will Go", Jan. 1, 2012, it predicted, "Innovations such as teller capture will become mainstream in 2012."
For more information
Information technology continues to be an integral factor in the operations of successful banks. For more information on applying emerging technologies to the banking environment, please contact Dean Lemons, principal, at 563.888.4106.