Local Banks Are Getting Tech Savvy

June 16, 2003
| By Katy Rent |
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AUBURN HILLS — Many community banks are now entering a league where playing with the big financial houses is no longer something to strive for but a reality, and many can thank technology for getting them there.

And, they're investing further in it.

That was one of the findings in an annual survey to determine not only the impact technology has had on community banks nationwide, but also to learn how many banks are truly tech savvy.

Conducting the survey were the Independent Community Bankers of America (ICBA) and InFinet — a network of five regional CPA firms, each specializing in serving community banks.

 

The Community Bank Technology Survey contacted nearly 1,000 banks nationwide broken down into 11 percent from the Northwest, 8 percent from the southwest, 49 percent from the Midwest and 13 percent from the northeast.

Due to an unstable economy many observers speculated that the banking industry would slash technology budgets. The survey found that impression to be false, however.

In fact it found that technology spending at financial institutions increased about 5 percent from last year.

However, what will change, the survey indicated, is economizing.

The response indicated banks prefer to make better use of the tools at hand and to add only proven technologies to enhance their existing service capabilities.

Meanwhile, 73 percent of community banks report having Internet sites. And of the responding firms that indicated they don't have a site, 71 percent are considering developing one in the next 18 months.

The survey also showed that while the banks continue to become more tech savvy, there are a list of technologies many will look into over the next year to year and a half, including statement delivery via e-mail.

According to the survey, more than 50 percent of community banks already enable customers to go online to view account balance information, transfer funds between accounts, pay bills electronically, view statements, update account information and print statements.

But with the increase in the capacity of technology, the survey also reports an increase in awareness of the need to maintain or improve security measures.

In the past 12 months, 59 percent of respondents reported having an internal security assessment and 55 percent had an external security assessment.

Whereas in last year's survey results only 54 percent of community banks had a formal written technology plan, 84 percent did have a formal written security plan.

This year, while learning to integrate the Internet, banks have still held true to the importance of security.

This year the survey reported that 80 percent of respondents not only rely upon the Internet but also have a formal, written network security policy, and 88 percent have a formal, written physical security policy.

Computer security firms advised that employee understanding and acceptance of Internet security is paramount, because it's primarily through lax procedures that institutions become vulnerable to hackers.

Another thing that has changed from last year to this is the method of security used.

Last year, 67 percent of respondents used firewalls, 53 percent used routers and 34 percent looked to encryption.

This year the survey showed the percentages increased, with 81 percent using firewalls, 49 percent using encryption, 41 percent looking to intrusion-detection software service for protection, and 29 percent using proxy servers.

The survey manager said those results show community banks are beginning to realize that being proactive with security will save money in the long run.

Another way some community banks are saving money is with check imaging. The survey found that 2002 seemed to be the year for check imaging, the technology's use skyrocketing due to higher postal rates.

Nearly half of community banks began imaging checks for processing and another 41 percent plan to evaluate digital imaging within the next 18 months. Only 8 percent of responding banks had no interest in this technology.

The survey also revealed that data is shared more readily across organizations, as local area networks (LAN) connect 90 percent of community banks and wide area networks (WAN) further connect 75 percent of those.

Limited budgets make technology decisions more difficult than ever. Although the survey showed technology spending increased at a rate of 5 percent last year, that's still down from a height of 16 percent annually in the late 1990s.

Community banks, then, must proceed with caution when determining which technologies to incorporate and which to continue to evaluate.

And according to the survey, many banks are being technology-cautious as well as technology-conscious.

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