Roche told a personal story about his Chase credit card being compromised recently.

"They called me within an hour, and provided great service–who wouldn't outsource for that? It's hard to find the talent to provide that level of service in-house," he said.

Razook, who frequently helps financial institutions tackle the outsourcing question, said as technology costs increase, the trend to outsource moves up the asset size ladder.

"I'm seeing larger financial institutions, upwards of $10 billion, moving to an outsourced environment," Razook said. "Sharing that capital investment with others is cheaper than paying for all of it yourself, no matter how big you are."

Focardi agreed with Razook, saying the decision to outsource is still closely tied to asset size, and the largest institutions still feel they have the resources to customize their own core systems to their advantage. However, second and third tier institutions are increasingly viewing outsourcing as a cost-effective way to compete with the big name tier ones.

Interestingly, O'Malley polled the audience and found that most still process daily work and handle other operational duties in-house. He joked that his service bureau sales team has been lying to him, but then seriously questioned if outsourcing statistics have been misleading.

Razook questioned how many audience members were from credit unions, saying in her experience, banks have more readily embraced outsourcing, due to their focus on bottom-line returns to shareholders. Because credit unions put more emphasis on member service, they tend to keep as much as possible in-house, she said.

A show of hands revealed that many in the audience were from credit unions, which O'Malley agreed may be responsible for the bucking of the trend.

Small Business

Smaller, community-based institutions might have an advantage when it comes to serving the needs of small businesses, Clancy said. The small business market was a topic brought up throughout the

conference, a sign that companies with fewer than $10 million in assets may be the industry's new target market du jour.

"Smaller institutions have the ability to deal with more obtuse information than a larger bank can," Clancy said. "It's those character issues that have been the bread and butter of entrepreneurial lending since the very beginning. The ability to make those credit risk calls, and the ability to take on risk where the big banks can't, is a distinct advantage."

Clancy said in his research, he's found that small business owners who make their own banking decisions behave much like a retail customer. For institutions that already successfully provide consumer services, micro-businesses with $100,000 or fewer in assets might provide a good transition into business services.

"When the decision makers are a controller or CFO, the business account takes on a different set of characteristics. How you adjust your business to handle that break is important," he said.

Clancy also questioned

the need for many institutions to expand into business services at all.

"The discipline of what not to do is often more difficult," he said, cautioning the audience against adding products or services because "you went to a conference and thought it sounded like a good idea," and compared the current popularity of business services to trends like

mobile banking.

Roche agreed.

"Plenty of banks like Wells Fargo already know how to take care of folks like that," Roche said. "The low-end small business customer only carries a $7,000 to $15,000 balance. If institutions are going after this market to get fat depositors, they'll be disappointed."

Health Savings Accounts

Health Savings Accounts, another wait-and-see product, requires significant customer education in order to produce enough sales to cover the initial investment, the panel agreed.

Razook said she's assisted financial institutions in launching HSA programs, and said the successful ones first researched whether or not customers needed the service; and even if the customer base demanded it, still invested heavily in front-line employee education.

"We hear, more often than not, that at first glance, HSAs don't make sense to a lot of people," Razook said. "HSAs require more education and work to sell than other products, so financial institutions should proceed with caution," she said.

Clancy agreed, saying said as a consumer, he didn't think an HSA would benefit his family. However, after the J.D. Powers executive's wife researched it, he

was surprised to discover it would, in fact, be

quite beneficial.

"It's a reporting nightmare, and if you're going to move enough product to cover the investment, you need to understand it will require an extraordinary level of consumer education," Clancy said.

Credit unions and banks considering HSAs for sponsor groups and corporate customers need to ask what value proposition they can offer the employer that a health insurance company can't, Roche said.

"From a delivery standpoint, it comes back to what's easiest for the customer, and the insurance

companies have a lot more experience in this area,"

he said.

Focardi said financial institutions should look at HSAs as more of a financial advisory product, and introduce the product only if it will contribute to a life-long financial relationship.

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