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Digital banking, marketing analytics and the 'omnichannel' top bankers' technology shopping lists for the coming year.
December 18 -
Banks should devote more attention to big data, cloud computing and other high-tech tools that will help expand revenue and less time on cost cutting and other short-term gains.
January 29 -
First Niagara Financial Group (FNFG) in Buffalo, N.Y., met quarterly estimates and announced a plan to invest heavily in technological improvements as it moves beyond its recent phase of rapid growth.
January 24 -
There is a lot of work to be done behind the scenes before Citizens can become independent of Royal Bank of Scotland, including the establishment of new technological, administrative and financial reporting systems, CEO Bruce Van Saun says.
March 18 -
Banco Bilbao Vizcaya Argentaria has agreed to pay $117 million for online banking startup Simple.
February 20
Some bankers have decided they've procrastinated long enough on making big-ticket technology purchases.
From superregionals like PNC Financial Services Group (PNC) in Pittsburgh, to community banks like Prosperity Bancshares (PB) in Houston, several banks have disclosed plans to increase capital expenditures on technology infrastructure by hundreds of millions of dollars.
"There was a lot of underspending on tech" during the financial crisis, says Damon DelMonte, an analyst at Keefe, Bruyette & Woods. "The banks that were dealing with credit issues, now that they've addressed those, they're turning their focus to technology."
The types of spending fall into two categories. Some, like First Niagara Financial Group (FNFG) and Zions Bancorp. (ZION), appear to be playing catch-up on nondiscretionary items like core processing or software to handle increased regulatory requirements.
Others, like Valley National Bancorp (VLY) and BBVA Compass Bancshares, are rolling the dice that if they spend big on automated video tellers and improved mobile banking applications, it will give them an advantage over less tech-savvy rivals.
"We do believe it provides us with a competitive edge because we are simplifying the retail banking experience," says Robert Mulligan, chief administrative officer at the $16 billion-asset Valley National, in Wayne, N.J.
Valley plans to spend between $10 million and $20 million, through 2019, on tech improvements at its branches, including video tellers, enhanced ATMs and its mobile platform, Mulligan says.
Banks are estimated to
These moves are rarely popular with bank investors. Since First Niagara announced that it will
Gary Crosby, First Niagara's new chief executive, spent his entire Feb. 27 presentation at KBW's banking conference defending his decision. First Niagara is spending between $200 million and $250 million, through 2018, to upgrade technology associated with treasury management and data analysis and to bolster its online banking.
"While these investments will lower near-term earnings growth, they are all necessary," Crosby said at the conference. "The longer-term benefits are there more revenue, more operating leverage, lower technology costs and greater cybersecurity."
First Niagara declined to make additional comments.
The investors who have questioned Crosby's decision are frustrated by the huge scope of First Niagara's project, and the immediate hit on its short-term earnings, DelMonte says.
"Nobody is undertaking a company-wide [overhaul] to their entire platform the way First Niagara is," DelMonte says. "Some of my other banks are telling me that they've been investing [in technology] all along."
Unfortunately for any institution that has postponed nondiscretionary items, it's something they must face, says Judd Caplain, a principal at KPMG in its banking and financial services group.
"Spending on technology to keep up with regulations, there's not really a payback on it," Caplain says. "It's the cost of doing business."
PNC will spend about $500 million over the next few years to "
PNC wants to "streamline our operations and technology in a way that goes beyond simply reducing expenses," Reilly said at the conference. "We want to do it in a way that also gives us further opportunities to grow revenue."
PNC declined to comment further.
Other regionals that have disclosed plans to increase tech spending include M&T Bank (MTB) in Buffalo, which will spend about $20 million on its mobile and online banking platforms, and Royal Bank of Scotland's RBS Citizens, which plans to spend about $500 million through the end of 2015 on major projects, primarily technology,
Other spending plans vary by bank. Zions, in Salt Lake City, is spending $200 million through 2019 on the conversion of its core processing system. BBVA Compass is upgrading technology through various avenues, including its
Some banks have not provided many details, but still acknowledge that tech spending is a top priority. Prosperity spends between $400,000 to $500,000 a month on technology, largely on improvements to its retail branches, CFO David Hollaway said Feb. 26 at the KBW conference.
"Probably the last two or three years the majority of all of our money has been going into infrastructure and technology," Chairman and CEO David Zalman said at the conference.
Banks may be taking heat now for their tech spending, but there is a potential silver lining, Caplain says. Increased investments in items like automated video tellers or new regulatory software can help a bank reduce employee headcount.
"When you've got hundreds of people manually reporting" regulatory items, banks can automate those functions, Caplain says. "That kind of spending does generally produce cost saves in the long run."
