Academic journal article ABA Banking Journal

Has IT Made the Banking Industry More Efficient?

Academic journal article ABA Banking Journal

Has IT Made the Banking Industry More Efficient?

Article excerpt

Modern banking--especially "post-internet" banking--centers on the electronic transaction.

Debiting, crediting, transferring monies, processing various forms of payment--not by a sluggish paper shuffle but by plucky strokes on key boards--these are among the heart and lung processes that constitute banks' core functions.

Consider that most people, if asked to define how they deal with their bank, would be as likely to put "interacting with computers" in their answer as they would borrowing or depositing.

We get into this at all because while one doubts the industry could have progressed as it has without computers, one wonders--have those thrumming factories of zeros and ones made the industry more efficient?

In some cases, the answer is rather obvious.

"Clearly, information technology matters to bankers and has made a transformational difference; the modern industry with it's size, complexity, and scope wouldn't exist without computers," says Jim Adamczyk, a Charlotte, N.C.-based partner, financial services, with Accenture.

"Transactions and back office process, have evolved to a high point of efficiency," Adamcyzk says. "You've only to look at ATMs, internet, and telephone-based banking and you see a complex delivery system that, overall, offers convenient and secure access to funds and lets consumers get other banking work done."

In the front office, too, computers have made their mark. Kathleen Steward, president and CEO, of the $80 million-assets Chisholm Trail State Bank, says her bank relies on Digital Insight for internet banking services to customers and DCI Wichita, in Hutchinson, Kansas, for information processing. The CEO says that while back office operations have long been automated, her front office looked and acted quite different eight years ago.

"We had a very bright, progressive employee who had many roles and responsibilities here at the bank, from compliance to IT," Steward relates. "She was the person who outlined the case for more computers in the front office. Initially, we had one."

Steward laughs in memory of how longwinded formal communications with attorneys, for instance, used to be, "with secretaries on both ends typing everything up at every step along the way." Flash forward to today, where a computer sits on every desk and e-mail is at least as primary as phone communications in getting decisions made and work done, and what you've got is a much more efficient organization. "I can't imagine doing the work we do today with out my PC," she says.

A word on definition

Keep in mind that "efficient," at least according to Webster's nonscientific definition, means, "productive without waste." There's a brisk, even hardheaded, aspect to efficiency that has to do with expenses versus revenue--all green lamp shades and a CFO's disapproving ducks over a dime spent poorly.

Then, there is the reality that machines are superior in handling the repetitive, the rule-based, the low "sex appeal" but high-value calculation. Let's call this the productivity of the transactional--or, phrased differently--efficiencies presented by all those rapid transactions we tend to take for granted.

Finally, there is an implied aspect to efficiency (typically promised by vendors) that is an ethereal experience and almost a religion to honest technophiles and engineering types. That is, that it will help to supply innovation. Most basically, technology can do this by improving how work is conducted (the much vaunted perfecting of business process) or by transforming data into information on customers, products, profitability, etc. It's in this Last area that technology has disappointed more often than not.

"Yet it's spending on innovation that's critical to making a difference in today's competitive environment," says Mark Greene, general manager, global banking industry, IBM, White Plains, N. …

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