A Build vs Buy Banking Story

For the first time in a while, I get the sense that members of the boards at financial institutions across the country are not just ready, but also eager, to embrace various strategies that leverage emerging technologies.  Accordingly, what follows are three things I’m thinking about as the week wraps up that have a distinctly tech spin to them.

pyramid-on-the-us-one-dollar-bill

Bringing IT In-House

Kudos to Scott Mills — President of The William Mills Agency — for sharing this American Banker profile of FirstBank, a $13 billion Denver institution.  With more than 115 locations in Colorado, Arizona and California, the bank is unusual in that it develops its own core banking software — made possible by an in-house IT team of 250+, or 12% of the bank’s 2,100 workers.  According to the piece, having a “homegrown core and in-house expertise enables the bank to be nimble and make changes quickly.”  Obviously, banks continue to use technology to generate efficiencies.  In fact, I’m seeing some community banks come up with creative solutions to meet their needs.  Case-in-point, this recent Bank Board & Executive Survey — conducted by Bank Director and sponsored by consulting firm Grant Thornton LLP — shows 84% of bankers surveyed plan investments in new technologies to make their institutions more efficient.  Still, FirstBank’s efforts to build instead of buying from outside vendors trumps any other bank’s effort that I’ve come across this year.  Oh yeah, their blog is pretty darn good too.

Finding the Right Partner(s)

For those more comfortable collaborating with firms who specialize in developing IT solutions, let me pass along an observation from my time with CEOs in San Francisco and Chicago.  Over the last month or so, I’ve talked with at least 13 CEOs about how they plan to stay — or potentially become — relevant in the markets they serve.  I’m not that surprised to hear that many want to get rid of branches — but do wonder as they turn to technology to fill in the gap if they have the right people in leadership positions.  Many smaller banks are focused on C&I lending and serving their business communities, so I don’t wonder about their branching focus, but do wonder about their hiring practices.  Certainly, it will become even more imperative to understand the various technology opportunities — and risks — what with so many “non-technical” executives and board members setting paths forward.

Square Peg, Round Hole?

Finally, I have something of a payments-focused writing streak going on this site, and I’m keeping it going thanks to this WSJ report vis-a-vis Square, the payments startup with a square credit-card reader.  As I found out, the company is eliminating a monthly flat-fee option for smaller businesses in favor of its usual “per swipe” fee.  The change is “prompting concern among some of Square’s more than four million customers, which include small businesses that were attracted to Square because it offered a cheaper alternative to traditional credit-card processors, which charge swipe fees of 1.5% to 3%.”  I wonder if this is opportunity knocking for community banks?  Certainly other point-of-sale vendors have seen it that way.

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To comment on this piece, click on the green circle with the white plus (+) sign on the bottom right. If you are on twitter, I’m @aldominick.  Aloha Friday!

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