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Most process improvement experts in the banking industry agree that an estimated 20 percent to 60 percent of technology systems capabilities go unused. The difference in the perceived and the actual capabilities available — known as the technology applications systems gap — can have a negative impact on a bank’s productivity.

What causes the gap?
There are two major factors contributing to the technology applications systems gap: Antiquated technology governance and IT management infrastructure.

The management and governance infrastructure employed to manage the technology solutions in banks looks much like it did 20 years ago. Back then a core solution consisted of accounting modules for demand deposit accounts, savings accounts, certificates of deposit and loans with a simple interface to a general ledger system. The majority of transactions were paper-based. The better systems had a customer information file allowing the end user to see basic information about a customer’s relationship with the bank. This was all done on a closed mainframe or minicomputer system that had no public-facing connectivity capabilities.

Times have changed. Today’s core applications systems are global processing solutions. They integrate electronic transactions from multiple sources including the Internet and image-based transaction systems. Historical access to transactions, customer information and up-to-the-minute customer reporting is provided through well-integrated electronic document storage applications that allow for sophisticated management reporting, marketing capabilities, real-time customer-centric servicing and dynamic security monitoring. Additionally, revolutionary changes are taking place in how customers expect to conduct their banking, and payments systems are evolving faster than ever. Today’s systems rely on powerful networking technologies that require highly skilled systems engineers to design and maintain optimal performance, security and continuity.

We’ve all seen the impact check imaging is having and how quickly new paradigms are developing, such as streamlined item processing and remote capture. Mobile banking is anticipated to be the fastest new technology ever to be accepted by banking customers and may be a catalyst for new technology capabilities that banks will need to adopt quickly to remain competitive. Such rapid change in the banking industry is a dizzying reality.

We’re set up to manage a simple application solutions environment that involves limited change and a low level of security risks.

What can be done to fix the gap?
Though the gap will probably never be eliminated, it can be managed to an acceptable level. The goal is to shrink the gap as much as possible by implementing effective technology governance and IT management. Managing the gap starts by comparing your bank’s technology governance and IT management practices to — and against — banking and IT industry best practices. This will help determine if your bank has kept up and, if not, what needs to be done to catch up.

The Federal Financial Institutions Examinations Council’s guidelines for managing technology, outlined in their IT examination handbooks, provide a solid foundation for developing IT governance policies and procedures that will help shrink the gap. The following key concepts are reflected in these guidelines:

• Create a technology steering committee with defined responsibilities; if you already have a committee, ensure that it’s functioning.
  
  
• Designate a system owner and a system expert for each critical application and system, including core, item processing, imaging and platform systems. This may be the same employee or two separate employees. Regardless, the owner is ultimately responsible for the system and is the go-to person for questions, vendor communications, user group participation and steering committee leadership. Also, all new releases or system versions should be reviewed by the system owner (with help from the expert, if a separate employee) for new capabilities. The IT department shouldn’t be assigned these responsibilities except for IT-related applications, including networks and telephone systems.
  
  
• Require your processing partners (vendors) to keep your organization up-to-date with new and existing capabilities. Relationship managers should make regularly scheduled visits to communicate with system owners, system experts and the technology steering committee. Work with your processing partners to complete periodic operational reviews and be sure they know who the contacts are from your bank.
  
  
• Don’t expect IT department members to make your application decisions and be system owners. The IT department’s responsibility is to support the bank’s IT requirements as determined by the business process owners, application owners, technology steering committee and management.
  
  
• Participate actively in user groups by requiring system owners to attend user group functions. Becoming involved in both regional and national user groups means employees will be privy to vendor announcements, system challenges and solutions, cooperative learning opportunities and the latest training venues. User group participants are also a common voice to system vendors.
  

Work to shrink the gap. Your bank will increase productivity as a result.

Kent Conrad is a director with RSM McGladrey Technology Risk Management. For more information, contact him at kent.conrad@rsmi.com.