Over coffee this morning I was reading about all of challenges we are having in the economy, job growth and the engine that drives it: all selling things. I work at Intuit, and we sell Online Banking services to Banks and Credit Unions. One of the biggest challenges we face in our business, online banking, is the relative spend on our services to “core processing.” This usually refers to the traditional data processing vendors like Fiserv, FIS, Jack Henry, etc. These vendors come from the original core businesses of accounting for our money. They are usually the biggest spend at a financial institution next to personnel (and all the power they hold securing our moeny) and perhaps the physical infrastructure – branches and buildings (that house the safe, the records, the money).
So why so much on these systems – well these were really important huge pieces of hardware from the original big technology companies like Diebold, IBM, NCR, Unisys, etc. They provided the safe, the buildings, the mainframe with core data processing that was often so expensive it was time shared with other FI’s in an outsourced manner. It handled the most important functions efficiently and often still does. When we were kids, we brought our passbook into the same branch every time we made a deposit. We cashed our checks there and in fact many of our checks made it to the same place after floating through the system. These core processors eventually automated much of this and linked it all with advanced networks that allowed for branch networking so that we could walk into any branch and conduct our business with the person behind the counter knowing who and what we were. These tellers and platform salespeople relied on these systems and it led to even more automation – around their functions.
All this was so monolithic, even when separate systems cropped up for automating teller, ATM, call center, check processing, and other important tasks; they still were often tightly integrated with the core data processing vendors. Then came the internet. As we all know – this changed everything. Distributed technology linked by advanced virtual private networks created a balance of power if you will, companies could distributed processing away from monolithic mainframes, they could make choices on what vendors made the best products for the task and the core data processing vendors lost power. So they took their capital and started to acquire.
All along Internet banking chugged along, growing slowly and adding functionality as the technology progressed. But we in online banking didn’t yet have the public’s trust and we didn’t always have access to data, we focused on the former and improved the end user experience and partnered to get access to the data. Online banking vendors began integrating more and more functions into one place all in service to making the end user – the consumer’s life easier. Processing power shifted to the cloud and connectivity lead by industry giants like Cisco facilitated more and more capabilities into these systems until they began to automate the one thing decades of core processing could never do, the teller functions. We then began to take on more of the core processing, handling payments and financial analysis. Automating the functions that a teller or customer service representative could never do on the fly and pretty much all that they did do traditionally.
So that leads to the original topic of my morning coffee consideration: Spend. We are now becoming one of the most expensive items for any bank to consider when creating budgets and considering operational efficiency. While I don’t like eliminating jobs – let’s face it – the automation of America in service to a better way of life and more personal wealth has been about doing just that. These people will shift to other positions of service and in fact many work for us. But the consumer today would prefer to do just what you are doing – get their information from the internet, from their computer, phone, tablet, and eventually – any device that is connected to the cloud, the network. If we are effectively eliminating two of the most expensive functions that banks traditionally spend our money on – the bricks and mortar infrastructure and the teller/customer support line – why wouldn’t our systems cost the most to operate. Imagine – we are duplicating a person, we are that magic robot we all see in science fiction. We are the building that holds the safe that holds your money in a secure and controlled environment. And with the connectivity that manages the flow of this data, these functions, all in the cloud – we are the most important investment a bank can make today.