September 25, 2008
Banks - Technology Brokers?
By: Chris Rimondi
Electronic payments and personal financial management are two areas that are hot right now in banking technology. Mobile payments and contactless payments are finally gaining popularity in the U.S. For businesses, technologies such as Electronic Billing Information Delivery Service (EBIDS) and other payment systems that interface with the A/P systems will gain popularity through the use of the ACH network. Personal financial management sites like Mint.com and Wesabe.com are great for aggregating all of your finances into one, easy to manage, spot.
These are all vastly different technologies and target different types of bank customers. However, they all have one thing in common; the ability for disintermediation or in other words the ability for third parties to provide these services instead of the customer's financial institution. (A good example of disintermediation is decoupled debit cards) There is no doubt that these services will continue to develop, the only question is who will provide these to the customer?
Community banks have the advantage to be the technology broker here but, must seize the opportunity. The strong relationships they have with their customers puts them in the best position to introduce new and unfamiliar technologies. A new survey by CashEdge confirms that customers would prefer to use their banks, instead of Paypal, for person-to-person payments.
However, the challenge facing community banks will be the ability to select best-of-breed providers to deliver these emerging technologies to their customers. Unlike the mega-banks, community banks can not develop technologies in house and must work harder for seamless integration with their existing infrastructure and core provider. That is why we must insist on open standards/protocols for data exchange.