Pushing the Needle of Innovation in Banking

Jojo Seva, CIO, NEFCU
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Jojo Seva, CIO, NEFCU

Technology and NEFCU

NEFCU is in a transformational phase where we intend to leverage existing and emerging technologies to be more strategic. For me, the essence of strategy is to create competitive advantage. Simply having a technology roadmap is not strategy.

“Phishing is the most successful social engineering tactic, and the financial industry is a prime target for phishers.”

We need to do things different, smarter and better - easier said than done in the banking world. Eight of the ten largest banks in the country operate in our community of Long Island, New York. We certainly can’t compete with these conglomerates on a dollar per dollar investment on R&D. However, I believe we can create competitive advantage in how we utilize technology bycreating operational efficiencies in front of our patrons and behind the scenes. 

One of my initiatives for the next couple of years is to fully migrate my data center into the cloud. I strongly believe that not having to manage the daily minutiae of Network Operations Center (NOC) administration and upkeep in-house will be a great source of competitive edge for us. With limited resources, I’m transforming my technology team to focus on providing high-touch customer service to our user community. 

Implementing effective business continuity capabilities with the most current NOC technology, security and redundancies is cost-prohibitive. Partnering with the right cloud service provider will solve the “what if” scenarios for us and will minimize the total cost of ownership of maintaining our critical systems.

A big organizational initiative for NEFCU and a game-changer in our market is transforming our branches from how and when it operates. We are in the process of deploying Interactive Teller Machines (ITMs). This technology not only allows for efficiencies in processing branch transactions and will provide for a better customer experience, but it will also give us the flexibility to extend when we’re available for business on a temporary, emergency or permanent basis.  

NEFCU is a financial institution delivering services via technology. We are not a technology company delivering financial services. It’s important to distinguish the two and to embrace who we are. I truly believe we can play with the big banks in the game of process innovation.

Bullets to Dodge

There are many a night I’ve stared at the ceiling thinking about ways to proactively preserve the confidentiality, integrity and accuracy of our enterprise and customer data. Today’s business landscape, regardless of industry, is replete of data breaches, identity theft and malware epidemics. The banking industry is especially vulnerable.

Although the practice itself has been in existence since the beginning of time, “social engineering” has been the information security buzz word for the last five years. The complexity of today’s security systems make domain perimeters tough to penetrate from the outside, and that is why professional criminals take advantage of human nature’s proclivity to trust via social engineering tactics – phishing, vishing, impersonation, etc. Bruce Schneier put it best that “…amateurs hack systems, professionals hack people.” Phishing is the most successful social engineering tactic and the financial industry is a prime target for phishers.

I’ve also resigned to the fact that it is not a matter of “if”, but a matter of “when” will we experience a security event. Besides emphasizing prevention, it is a priority to prepare my team on how to quickly identify and effectively respond to an attack.

It is my expectation that our business partners stay vigilant in their information security programs and protocols. I see them as our biggest security vulnerability as showcased by the Target breach of 2013. 

The Prevalent Trends

Mobile payments have transformed our industry almost overnight. At the same time, the mobile payment landscape is both exciting and fledgling. There were schools of thought a couple of years ago that one dominant mobile wallet would have prevailed by now. That was the case in India and Africa not long ago, but not anymore. I could be wrong, but I don’t envision one mobile wallet solution cornering our market. Moreover, don’t count out the dominant credit card companies just yet. 

The great thing about technology is that it changes exponentially. With these changes come a host of choices – ApplePay, Samsung Pay, Android Pay, Coin, CUWallet, etc. Strategically, we need to selectdigital payment solutions Long Island merchants will adoptand  customers find convenient to use. We must start where our core membership lives and go from there.

Another mobile trend that will have significant impact on NEFCU is the adoption of a mobile device-centric business culture. Mobile technology exists today that can replicate everything we do now. Another aspect where we can compete with the big banks is the speed in which information can be available for our management team, tellers, sales team and back office support departments.

It may not be mainstream yet, but block-chain technology will also revolutionize how we do business. Block-chain is the backbone of crypto-currencies such Bitcoin, Ripple, Mastercoin and alike. We need to prepare how to transact using digital currencies. Again, this is not a question of if, but when will we need to have this to stay competitive in the market.

The Best Piece of Advice

Vendors are and will always be critical to NEFCU’s success. From time to time, partners can also be roadblocks to where we want to go.We need vendors that share our priorities and goals. Reducing the operational expenses and complexity of initiatives is critical for a successful partnership. System integration, conversions and installations are still too laborious and costly than necessary. Vendor adoption of credit union protocol standards (e.g. CUFX) will minimize customization expenses and improve speed to market significantly.

I can’t stress enough that vendors must not only keep up with the changes in the banking technology landscape, but they have to stay ahead of it – security protocols, OS upgrades, virtualization, paperless, automation, mobility, etc.

There is a tendency in our industry to innovate delivery channels and member touchpoints. It is common to not put enough focus on minimizing the soft costs of running operations. These costs are not reflected on efficiency ratios and other financial metrics, so it’s not always on everyone’s consciousness. If not monitored and managed, valuable resources and significant time are wasted. Most importantly, you will not achieve your full productivity potential as an organization. These productivity pitsmanifest in a number of ways from the outdated this-is-how- we’ve-always-done-it procedures andre-engineering processes or project scope creep, because they weren’t done effectively the first time. It may be counter-intuitive to some, but spending the time designing systems with all affected stakeholders at the onset of any initiative or documenting all requirements for an RFP process are softcost savers in the long run. Lastly, partner with vendors that have staying power. Leverage Gartner’s magic quadrant methodology to determine who are the industry leaders and visionaries. Research material is already out there for a lot of technology vendors. Why reinvent the wheel?

The soft cost repercussions are sometimes more expensive relativeto actual hard costs when you end up implementing the wrong solution. When selecting systems, don’t aim for quick-fixes, but consider how it will fit your technology vision three, five, ten years from now.The CIO role has evolved from infrastructure-centric to be more innovative and strategic. Creating competitive advantage doesn’t mean spending more dollars on technology either. What you can do different, smarter and better is the cornerstone.

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