Management Strategies: Parallel Construction


A three-step checklist to align technology with bankwide strategy

By Trend Fleming

Three Important Concepts

One of the biggest technology challenges for community banks can be simply embracing change. However, I’ve found that understanding three key concepts can help community banks fully embrace the necessary change to effectively incorporate technology planning into their enterprisewide planning efforts.

First, management awareness. Management must appreciate that customers who use electronic delivery channels exclusively can be more profitable, and more loyal, than those who continue to use branch and telephone services. I call this Invisible Loyalty.

Second, self-service electronic delivery channels are the future. As the press of business increases, it will be true that increasing customer loyalty and satisfaction will mean reducing the amount of time required to successfully complete their banking activities. Remember that customers are not in the banking business, they are in their own business, whatever that may be. Channels that provide easy access to banking products and services and allow customers to quickly complete their banking will be essential to increasing satisfaction and generating loyalty.

Third, technology requires ongoing investments. This is often a sticking point for community banks. Yes, it may seem that operations and technology staff is always asking for money. However, maintaining adequate infrastructure and acquiring technologies that support strategic goals are now essential to every bank’s success. So base your community bank’s planning and strategy on the fact that ongoing technology investments are now simply part of doing business.
—Trent Fleming

There was a time when all bookkeeping in banks was done by hand. Over the years, automation crept in: manual posting machines, magnetic ledger card readers, basic computers. By the 1960s, most banks had their work processed by a computer, either one they owned or one provided by a correspondent bank or other third party. Yet, until the introduction of the ATM in the 1970s, customers had no choices for accessing bank account information other than by phone, mail or in person.

Once the gateway was opened, other delivery channels came rapidly in succession, from voice response to PC banking, then Internet banking and mobile banking. The ways customers can remotely access banking products and services continues to increase. The watershed change is that electronic delivery channels, including the use of chat and text for customer service, are the preferred method of banking for many customers. For too many community banks, however, the oversight of and planning for their technology needs has remained firmly separated from enterprise strategic planning. Customers are forcing this to change.

Banks that fail to acknowledge and address the importance of technology in their overall strategic planning efforts are at risk of failing to provide the products and services that customers are looking for. Rather than developing an enterprise strategy and asking operations staff to develop their own plans, it is essential that banks include technology matters in their overall planning efforts.

Admittedly, traditional strategic planning efforts can leave little room for addressing the sometimes confusing needs of a bank’s operations and technology areas. Here are three key areas to check to ensure your community bank’s technology is properly aligned with its strategic planning efforts.

1. Infrastructure.
The availability of electronic delivery channels creates in customers the expectation of high availability. This simply means that when a customer attempts to use a particular delivery channel, he or she expects it to work. In addition, internal systems that are used for your bank’s purposes, or by its employees who are serving customers, must also be adequate to meet end-user needs and provide reasonable response times when doing so. These concepts place a high burden on a bank’s systems and those of its service providers.

Thus, planning for investments in technology infrastructure is important. A bank must have adequate data communications lines and power supplies, with appropriate backups for each, so as to minimize the possibility of downtime. A bank’s key systems, and those of its service providers, must have proper redundancy to prevent data loss and minimize downtime. While contingency planning is indeed a regulatory requirement, it is better to see it as a prudent business practice and invest accordingly.

2. Delivery channels.
Customers are readily embracing new ways to access bank products and services. Many new delivery channels offer great benefits to both the bank and the customer. A good first step in identifying the “next” technology to invest in is to utilize usage reports to understand which of your products (and specific features) customers are using most. In some cases, promotional activities to increase the use of selected delivery channels could be your community bank’s best investment.

Banks that fail to acknowledge and address the importance of technology in their overall strategic planning efforts are at risk of failing to provide the products and services that customers are looking for.

Any strategic planning conversation involving delivery channels also needs to include how your community bank can use technology to operate more efficiently or expand its branch network. Branch traffic is down, a trend that will continue. Yet maintaining some level of physical presence is critical to your bank’s brand and reputation in its markets.

Redefining branching by leveraging technology with a new breed of “universal associates” will likely mean more self service by customers and higher satisfaction rates when customers need to interact with a live person. Board and C-level discussions around this topic will aid in changing long-held ideals about the proper configuration of branch services, and whether expansion into new markets is possible without traditional brick-and-mortar investments.

Again, leveraging data regarding the use of both branch and electronic delivery channels will help your community bank’s planning efforts by improving its understanding of existing customer activities and pointing to important trends.

3. Administration.
Finally, operations and technology departments should be managed differently than lending departments. While salaries are important to every employee, operations and technology staff members are also often motivated by other factors, including the degree to which they are challenged, their access to emerging technologies and how well they are made to feel appreciated.

By including technology in your community bank’s overall strategic planning efforts, the chances its technology investments will be successful will be greater. While customers are seldom willing to pay to use new technologies, your bank’s operating costs can also be dramatically reduced when technology is properly selected, supplied and supported. That is, when customers use self-service channels, your bank’s cost of serving those needs will continue to drop.

Trent Fleming ( is the principal of the technology consulting firm Trent Fleming in Germantown, Tenn.