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Banking Technology Trends for 2008
The convergence of gaming and Internet social sites have brought us to the post-Internet era of 3-D virtual worlds. Virtual worlds, such as Second Life are real today and residents of these worlds are conducting business. It only took a short time for Second Life to realize that, even in virtual worlds, the “in-world” banks (the name banks are referred to in virtual worlds) need to be regulated. As of January 22, 2008, it is prohibited to offer interest or any direct return on an investment (whether in Linden $ or other currency) from any object, such as an ATM, located in Second Life, without proof of an applicable government registration statement or financial institution charter. This will probably provide a logical entry for legitimate financial institutions to operate in a virtual world. Why else would Wells Fargo appoint a VP of Social Media? By the way, this is not just another marketing position; the individual in this role has been quite busy, opening Wells Fargo’s online virtual community, “Stage Coach Island” (see http://blog.wellsfargo.com/StagecoachIsland).
Wells Fargo has gone a long way in connecting with the millennium generation including a “blogs” section on their web page (http://blog.wellsfargo.com/). Wells Fargo’s updated millennium-friendly website increased online applications by 50 percent.
If you think Facebook is all about a social network for college kids, you might have missed the release of their advertising program in November 2007. Creating a Facebook page for your bank is free (no hosting fee, imagine that), though you might have to pay a “pay-per-click” fee to drive traffic to your page. Will 2008, be the year you will be creating your Facebook page?
Let’s get back to the real world, banks are evaluating mobile banking and payment services via personal mobile devices and personal digital assistants, without requiring a trip to the bank or logging on to a computer. This is one technology that community banks might reluctantly implement in 2008. Why reluctantly? It will be expensive, and the adoption by customers will be slow at first, especially if banks charge a fee for it. Never-the-less, to keep up with the large banks that already have this feature available for their customers, community banks may have to adopt this technology to stay competitive.
We all know about remote deposit capture for commercial clients; it makes sense, adoption rates are high and it saves money. The next product that you may be evaluating is deposit@home, providing the ability for customers to scan checks using a home scanner, a Windows 2000/XP computer and Internet connection to deposit checks into their bank accounts from home. In 2008, we will also see other remote check deposit technologies for consumers, such as scanning checks via ATM machines, and using kiosks at commercial locations such as malls, universities and large corporate offices.
With the credit crunch and economic uncertainty, 2008 could possibly see the first slowdown of growth in IT spending. One research and consulting firm is predicting that IT spending growth will see a slowdown, rising a modest 3.8 percent—down from the 4.1 percent growth in 2007.
With the wealth management industry growing rapidly, a new generation of trust technologies is emerging, providing end-to-end solutions for your trust departments. These technologies will also level the playing fields with larger financial institutions and allow for large assets under management.
Good news on identity theft – the volume is expected to go down as financial institutions and consumers are better prepared to protect against and monitor for identity theft. However, the cost per identity theft continues to increase. Security continues to be a challenge, and by the end of 2008, banks will truly understand the value of encryption as they encrypt everything from laptops to USB drives.
The FACT Act Identity Theft Program went in effect on January 1, 2008. The “Red Flags Rule” under the Fair and Accurate Transactions Act (FACT Act) includes the development and implementation of a mandatory compliance date of November 1, 2008. Many community banks have implemented an Identity Theft policy and will now have to institute a program to identify potential identity theft, including the ever famous “risk assessment.” As usual, we will see a number of software vendors marketing their software as compliance with the “Red Flags Rule,” when in reality, compliance will require internal processes and training as opposed to implementing certain software.
Below are small video clips that will give you a glimpse of how technology is going to effect and change the financial institution industry. We have all heard of remote deposit capture, but what about ATM deposit capture .... wow, how would that work? Check out the attached links on how these emerging technologies work.
Also, some banks are doing very creative things in the web-front to connect with the millennium generation. Wells Fargo's new web-site (with blogs and virtual worlds) increase on-line applications by 50%. Some banks have even started developing Face Book pages to promote their services. Maybe all is not so gloom with our financial institution clients during these credit crunch / sub-prime mortgage times.
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