Time Is Now For Small Conn. Banks To Make Big Tech. Investments

Slow and steady? Or just left behind? Tech. Advice Comes With Mixed Messages

By Laura Schreier
Commercial Record Staff Writer
02/05/10

Community bankers have long prized their place as friendlier, more accessible alternatives to giant banking brethren. But in certain quarters, they’re being criticized for not being accessible enough – via the Internet, mobile banking or even the ubiquitous (and free) social networking sites like Facebook and Twitter.

The digital world may not be the traditional milieu for smaller banks, but that’s where younger customers are headed, analysts say. A few short years ago, digital banking was the sole domain of the largest banks that had the resources necessary to enter, and corner, the online market.

But technology is cheaper now, and while the time is ripe for aggressively pursuing these investments, that window is going to shut very soon.

“This is the first time that the market has turned against big banks,” said Kelly Trammell, a managing director with Texas-based Sheshunoff Management Services, which means now is the time to impress customers.

The spotlight will quickly swing away from smaller banks, he warned, and they’ll go right back to being in the big banks’ shadow. With technology investments changing the market so quickly, smaller banks can’t be content to follow big bankers’ lead anymore.

Must-Have, Or Mostly Hype?

But while one side is urging banks to invest in gee-whiz features, Jotham Trafton tempers the message. Senior vice president and chief strategies officer for Avon-based bank technology company COCC, Trafton says banks are putting their investment dollars on a variety of bets, but no one can be sure what technology is legitimately game-changing, and what’s just hype.


“It’s not always the easiest thing to figure out,” he said. For example, Trafton pointed out that large banks such as Wells Fargo made a push toward mobile banking in the early 2000s, but largely found that customer demand wasn’t high enough.

Many community banks have the systems in place to launch such programs, he said, but they need to determine whether customer demand will make it worth the extra cost of starting it up.

Analysts also disagree on the worthiness of other mainstream technologies. For example, remote deposit capture is a way in which customers – mostly businesses – can deposit a check by scanning the check’s image and transmitting it to the bank. Trammell says if bankers haven’t already invested in this, they shouldn’t bother. Checks are dying out as a transaction method, he said, and banks should put their money elsewhere.

But Christine Barry, research director with Boston-based Aite Group, offered a different opinion.

“Checks are going away, but they’re not going away that soon, especially for small businesses,” she said. And as many community banks try to court small business dollars, they’ll need to offer this technology. That’s why she’s seen a number of bankers continue to invest in remote deposit capture into 2010, although the concept has been established for years.

Fast Followers

Martin Geitz, president and CEO of The Simsbury Bank, said his bank does well as a “fast follower,” content to let competitors quickly adopt new technologies, iron out the kinks and establish demand first, rather than trying to be cutting edge with flashy new services.

As for technology projects, the bank has devoted itself more recently to improving its online banking capabilities. It recently unveiled e-statements, which have garnered several hundred customer sign-ups in the first two weeks of implementation.

“There was obviously a lot of pent-up demand for e-statements,” Geitz said.

The bank has been introducing new offerings bit by bit, recently adding remote deposit capture and health savings accounts – again, after concluding these services had matured enough to be a safe bet.

Future plans may include launching into social networking, which has garnered enormous amounts of buzz from retail businesses, and at first blush appears cheap and easy. But Geitz said he needs to be sure the bank has a strategy for keeping up communication when the networking accounts are set up, because a Twitter feed, for example, doesn’t wow anybody if the bank doesn’t have the capacity to keep up a dialogue.

James O’Donnell, vice president of commercial deposit services for Enfield’s New England Bank (NEB), said his bank is also discussing new investments in mobile banking and social networking, but, like many banks, wants to resolve security concerns before launching into the new venture. NEB’s main focus at the moment is geared toward commercial customers, O’Donnell said.

In June, the bank plans to launch command business banking, a cash-management system customers can use to handle a number of day-to-day financial functions, including wire transfers, automated clearinghouse (ACH) payments, stop-payment commands and reconciling various accounts. O’Donnell said the bank will spend the coming months phasing existing customers onto the new program.

“We’re going to make it as easy on our customers as possible.”