SCOTTSDALE, Ariz. – Spending on technology at credit unions and banks has been pretty level the past five years, and a key to the organization's success remains in how those dollars are spent and how the results are measured. That's a bottom line from "The Cornerstone Report: Benchmarks and Best Practices for Mid-Sized Banks," a study released recently by Cornerstone Advisors. "Making the right technology investments and measuring the technology payoff will be crucial to credit unions wanting to stay competitive in the long run," says Terence Roche, one of the Cornerstone consultants to banks and credit unions who helped compile the 112-page study. The results come from studies of 71 institutions – a mix of banks and credit unions ranging from $300 million to more than $10 billion in assets – that spent 30 to 50 hours each on their replies, Cornerstone said. The report lists best practices in a range of areas, and notes that "although many credit unions believe technology is a major differentiator, overall technology spending has not increased in the past four years when measured as a percentage of assets." As in 1999, financial institutions spent about .27% of assets on technology annually, with a range of .18% to .45% in 2003 among the respondents. However, Roche notes, that technology spending is increasingly occurring outside IT, and that when all the costs are added up, "technology might represent the biggest investment your credit union makes after employee costs." And spending on such areas as process improvements is paying off, Cornerstone says. Loan productivity is one example, where the median number of consumer loans funded per "centralized consumer-origination employee" increased from 38 a month in 2002 to 42 in 2003. "High performers made more use of the Internet and loan-by-phone programs, relied more on credit scoring and minimized the time their branch employees required to complete an application," Roche says. It's tougher to show a return on the investment in other areas, however, and that shows up in the decision to spend, the 2003 report found. "Investments in back office and analysis systems grew slowly, and in some areas actually declined," the report says. "This is at least partly due to the fact that ROI was hard to prove and delivery systems were deemed to be more important." That conclusion shows up in such findings as the fact that every respondent offered Internet banking and nearly every one offered consumer bill pay. Meanwhile, about half had data warehouses, 26% used CRM software and only 1.5% indulged in wireless banking. Meanwhile, across the board, a culture of cooperation, of shared information, goals and technology is a key to a more seamless, successful operation, something the Cornerstone Advisors say can be uncommon. As an example, the report's assessment of CRM deploys, based on survey results and the consultants' visits to numerous banks and credit unions, is rather dim: "Customer information resides in a half-hearted CIF file, a working but limited MCIF system, and the half-finished carcasses of CRM projects," the report observes. "Technology is everywhere, but so are paper forms. Excel spreadsheets, manual sales tracking procedures and the constant `tick-tick' of keying and re-keying the same information into different systems." It also notes that "sales, productivity and profitability information more closely resemble a swap meet of report formats and `versions of the truth' than a tightly integrated `strategic dashboard'" for the organization. Cornerstone Advisors maintains a tech info Web site in cooperation with CUES at www.cuestechport.com and its consultants also write the weekly "Gonzo Banker" e-mail newsletter. For more information, go to www.crnrstone.com. -

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