Author: Lesley Karstens, email@example.com
It’s hard to believe that summer 2013 is already underway. With summer come the sounds of kids playing and splashing in the pool, parents wishing school was back in session and for those luckiest of all, the thoughts of budgeting season lurking on the horizon. Typically this is a dreaded time of year that no one wants to begin, and quite often gets started later than hoped for. This year I propose a different outlook! What if you could actually make budgeting season easier on yourself and those around you? What if you could complete a budget on time? What if you had extra time to run different scenarios? What if you could run variance reports easily anytime throughout the year? What would these things mean to you, to those around you? Would you find yourself at peace? Would you be more pleasant to work with? Would you be able to focus more time on other duties you have?
If you answered ‘yes’ to any of these questions and would like to make the What If’s a reality…then it’s time to say good-bye to Excel and hello to a budgeting system.
Top 4 Reasons to Use Excel
- We’ve always done it this way and I have my process down
- I’m familiar with Excel functionality and output
- It’s easy to use
- It’s cost effective
Top 4 Reason NOT to Use Excel
- We’ve always done it this way and I have my process down
- I’m familiar with Excel functionality and output
- It’s easy to use
- It’s cost effective
I hear all the time that “this is the way we’ve always done it”, “I’m comfortable with the process”, or “I don’t need anything more complicated to learn.” What if I told you using Excel wasn’t as accurate as you thought and quite frankly you are making decisions based on incomplete information? What if I told you that I can run a budgeting model better than I can run Excel? Don’t make the fear of learning and the fear of change stand in your way of a better process. It’s time to make a change!
A budgeting model takes information from your core system including current cash flows, so that you know what you have on the books, and can accurately calculate how your future is going to look. A budgeting model will document all actions taken so that you have a report of what assumptions were made. A budgeting model will allow you to run easy “what if” scenarios. A budgeting model will allow you to run projections all year long. A budgeting model will replace much of the reporting you are doing in Excel today.
Make this the year you stop saying “What If” and start saying “What next”! If you’ve moved to a budgeting model, please share your experience and thoughts below and if you are still using Excel, please share the reason why.
Author: Lee Wetherington, firstname.lastname@example.org
POP QUIZ: Lee boards a plane in Florida today. He must deliver a speech in Panama tomorrow. In which direction will his plane fly?
If you guessed “east” or “west”, you should probably avoid the “Places” category when playing Jeopardy™ at home. If you guessed “south”, you are very logical and well-versed in geography, but completely wrong. If you guessed “north”, you are either confused or cynical, but entirely correct. Today, I must first fly north (to Atlanta) before I can fly south (to Panama). It’s a plane-travel paradox, one with which many summer-time travelers are painfully familiar.
Payments are also suffering a season of head-scratching paradox. While we sometimes assume progress is linear, it is often anything but, especially in payments.
Payments fees are in decline, right? Yes…and also, no.
Durbin cut debit interchange fee income in half for big financial institutions. In aggregate, more than $100B in payments revenue will disappear thru 2016 due to regulatory fee-income compression. Even smaller exempt institutions are beginning to see their interchange rates wane due indirectly to market forces unleashed by Reg II.
So payment fees are in decline, right? Wrong. Think yin and yang.
EXHIBIT 1: To regain lost revenue, the card networks have unleashed a bevy of new fees, fees that unlike interchange—which passes from the acquirer to the issuer—are retained by the card networks. These include Visa’s Fixed Acquirer Network Fee (FANF), Acquirer Processing Fee (APF), and Transaction Integrity Fee (TIF), as well as MasterCard’s Network Access and Brand Usage (NABU) fee, Acquirer License Fee (ALF), and Staged Digital-Wallet Operator Annual Network Access Fee. Over the past three years, according to Digital Transactions, card networks’ revenues have grown faster than the transaction volumes they process. More fees, more revenue.
The bad news for issuers? Due to fierce competition for transactions, interchange rates are beginning to ebb for financial institutions exempt from Durbin. Visa’s cheaper PIN Authenticated Visa Debit (PAVD) alternative for acquirers has lured substantial volume away from regional EFT networks and compressed debit interchange rates. The good news for issuers? Debit transaction volumes continue to grow, and the card network fees listed above fund billions of dollars in rebates and incentives paid to card issuers.
EXHIBIT 2: While big-bank payment revenues have suffered, PayPal—who claims exemption from Durbin as a three-party network—has seen its payments revenue surpass each of the top 5 banks in the U.S., and it expects big increases in payments revenue this year and next. PayPal’s revenues demonstrate the continuing value and ability of payments to command fees.
The bottom line? Payments fees are not in decline; they’re shifting. Cap a fee in one place, and it will resurrect elsewhere. That’s the nature of the market. Issuers should not despair. Card networks must continue to compete both for acquirer volumes and issuer loyalty.
The winners of these fee wars will be not only incumbents with scale but smaller players with the creativity to remove friction and unlock value around payments. The future of payments will be more about influencing behavior that results in a payment and, paradoxically, less about the payment itself. Ultimately, payments will become virtually if not literally invisible, i.e., friction-less.
EMV will reduce payments fraud, right? Yes…and also, no.
Yes, when they arrive, EMV chip cards will substantially reduce card fraud at the point of sale, but they will also increase online payments fraud. In other parts of the world where EMV has been adopted, online fraud has increased sharply. In Britain, for example, card-not-present fraud grew to 62% of all card fraud in 2010 from 30% in 2004. In Canada, online fraud increased to 50% of all card fraud in 2010 from 31% in 2008.
This is called fraud “whack-a-mole”. Make fraud tougher in one place, and fraud will seek the more vulnerable alternative. Just because EMV will reduce card-present fraud does not mean net payment fraud will decline, especially since we are increasingly migrating to a card-not-present environment.
The real question remains: why not leap-frog to a superior form of payments security that leverages the considerable computing power of the average smartphone? If mobile payments are right around the corner, why not leverage the mobile device to secure both card-present and card-not-present transactions in ways not possible with the power of a chip card?
We are fast approaching ubiquitous mobile payments, right? Yes…but mostly, no.
It’s difficult not to feel a little Jeckyl-and-Hyde about mobile payments these days. On the one hand, there are 280 mobile payments startups in the U.S., and you can’t go a day without reading about a new mobile payments app, wallet, or pilot. On the other hand, the fragmentation introduced by 280 startups—not to mention the absence of interoperable standards and no clear, dominant leader in the space—means our approach to universal, ubiquitous mobile payments is slowing rather gaining speed.
Unofficial word from Isis’s NFC mobile-wallet pilots in Austin and Salt Lake is discouraging, and the head of Google’s NFC wallet recently left “to pursue other opportunities” after getting no traction. Meanwhile, cloud-based digital wallet providers like PayPal have had better results, but both WalMart and First Data have announced they will not accept or process PayPal at the POS.
So, is NFC dead? Not yet. According to ABI Research, the number of NFC handsets in the U.S. will grow from 40 million last year to over 100 million this year. And both Visa and MasterCard have recently signed agreements with Samsung—the world’s largest handset manufacturer—to allow those networks to provision payment-account data to Samsung’s NFC-enabled mobile phones.
Progress, right? Not without NFC-enabled POS terminals. If U.S. merchants are skeptical of EMV, they are outright dismissive of the incremental cost/benefit of NFC-enablement, especially considering the immanent launch of their own non-NFC payments network, the Merchant Customer Exchange (MCX).
So, are payments making progress? Yes, it’s just often unclear in which direction that progress is headed. I just hope my plane home tomorrow heads north.
Author: Pat True, RTrue@profitstars.com
Few industries in the Unites States represent the widespread demographics that we see in the trucking sector. While overall economic expansion has been slower than most would like
during recent years, the trucking related businesses have been a bright spot. For our own Lending Solutions business, trucking companies have historically represented 10 – 15% of the relationships managed by our financial institution clients. Even as our overall business has expanded, that trucking proportion grew to 18% in 2012, largely due to increases in the energy sector and pockets of growth in the manufacturing and construction sectors. Consider these key metrics reported recently by the American Trucking Associations and the Bureau of Labor Statistics. They point out how well small trucking related business could align with the goals of community based financial institutions to achieve loan growth.
- The trucking industry was a $642 billion dollar industry in 2012
- Most trucking companies are small businesses. The ATA reports that 97.2% of them maintain fleets with fewer than 20 trucks while 90.5% operate fewer than six trucks.
- In 2011, 6.9 million people in the US were employed in trucking related jobs, up 1.5% from the previous year. The industry also reported that there were an estimated 3.1 million truck drivers at that time.
- There are more than 440,000 for-hire motor carriers in the US and more than 700,000 private carriers.
- Business failure rates in this industry totaled an estimated 495 in 2012, which represented a decline of more than 38% from the previous year.
- Industry revenue rose 2.9% in 2012 while per mileage revenue rose 2.8%.
Source: ATA Trucking Trends 2013 and the Bureau of Labor Statistics
Representing a significant number of small business owners across the country, trucking businesses are also disbursed across virtually every market in the US. For that reason, they can represent opportunities for most community based financial institutions. That being said, lending in this sector does require some working knowledge of the business processes and terminology specific to trucking. If you are looking for a great source of information for the industry, I would recommend the ATA Trucking Trends 2013 report referenced above. It can be a meaningful industry analysis tool for institutions that want to explore this business sector and educate their lending staff.
Our financial institution clients typically want to explore lending opportunities that can have a significant impact on their local communities. Trucking serves that goal very well, given that the majority of these companies are small businesses that employ locally and have a direct impact on local economies. They also represent an opportunity to grow loan portfolios through equipment and working capital financing.
Have you experienced the opportunity to grow your loan portfolio through the trucking sector customers? Share what you’ve learned.
Author: Rob Hudecek, RHudecek@profitstars.com
“Back office…when did we get a back office, I thought we outsourced?” Even though most of
the transaction processing for financial institutions has moved to electronic, there is still a lot of paper being utilized today.Whether your institution’s item / check processing runs in-house, is hosted through a data center, or is handled by a hybrid model (a common mixture of locally installed software, and outsourced operations), a little refinement can go a long way.You cannot completely automate customer service, but you can automate many processes to better serve these customers.
Scan Once - Serve Many
Can all scans be created equal? With the latest generation of imaging hardware, it is difficult not to get a high quality image, whether it’s a check or a full page loan document. Though institutions typically employ several capture tools based on the operational requirements (e.g. teller line, remote deposit, lockbox, proof of deposit, document imaging), often times customer service representatives require research from all sources. An important step toward streamlining the labor expense in capture and research is employing a “scan once” image integration wherever possible. Often this can be accomplished by importing images to an enterprise document imaging system, however many times additional sharing across other software applications is needed. Some integration considerations include:
- What is the native image kind (color, greyscale, or black and white), quality (DPI – dots per inch), and type (PNG, JPG, TIF, etc.) needed?
- Can the initial scan handle the highest image quality needed and downgrade when necessary (i.e. scan greyscale and downscale for sending the cash letter)?
- Can other systems “point” to a central image depository (minimizing the need for storing an image more than once)?
Let the Paper Work for You
Another way to increase efficiencies is a review of all institution controlled documents (e.g. loan applications, general ledger tickets, counter deposits, payment coupons) and how standardizing some formats can assist in both image processing and research:
- Full color pages work great when pulling the correct form to use, but can cause challenges to imaging systems (causing text to read poorly or disappear entirely). If color coding documents are important, apply them only to the header or footer away from important text that needs to be processed or researched.
- For all non-check MICR documents, consider using a different internal (non ABA) routing number such as “555555555”, for each document type (cash-in, cash-out, count deposit, etc.) to increase the effectiveness of software systems recognizing the application.
- For fill in areas, where possible, employ the use of fixed location boxes with dropout ink. This will increase handwriting readability and provide enough space between fields to improve character reading by software applications.
Whether you are processing loan applications, deposits, or lockbox remittance for your lockbox; document preparation often remains the most tedious and expensive element in processing. This includes mail opening, extraction, cleanup (removal of staples, paper clips, etc.) and batch separation. Work process improvement can begin with opening the mail:
- Post Office Box Sorting
- Letter Openers, Bins, & Stacks
- Automated Mail Opener / Extractor Hardware
- One Touch Automated Mail Opener / Extractor / Scanner / Sorter Hardware
- Workflow Monitoring
- Distributive Capture
Distributive, Not Just Branch Capture
Since the adoption of Check 21, most financial institutions have embraced branch and merchant / member capture in some capacity. With the decreasing cost of imaging hardware and increased software functionalities, a review of current processes could lead to a greater adoption or “distribution” of the capture load:
- Bring back office scanning to the front counter through the utilization of teller scanning or remote application scanning. While many Tier 1 banks are looking at ways to minimize branch foot traffic, many community institutions have found successful business models in bringing in new customers by accepting and scanning payments for local utilities, tax offices, and businesses.
- Remote check deposit capture has traditionally been a reactionary offering – presenting the solution if requested and only for “good customers”. Many software solution providers today offer a suite of remote deposit module applications. With the adoption of enhanced risk features, and pairing the solution module that best suits the individual depositors’ needs, there is little reason today to not consider a wider adoption.
What operational efficiencies have you adopted this spring?
Author: Jacqueline Marshall, JaMarshall@jackhenry.com
In last February’s blog – Best Practices for Building an Enterprise Wide Electronic Channel Strategy, I wrote that financial institutions should consider a paradigm shift in strategy that includes a focus on e-banking services, service components, and delivery channels.
This strategy is also important as the process will help determine how all banking delivery channels may change after deploying mobile banking. What’s key in this risk based approach is development of an effective delivery channel mix for future online and face-to-face banking interactions. Prolific use of mobile devices doesn’t necessarily spell the demise of traditional banking channels, but instead, powers customer’s demand for more information and interaction through multiple touch-points, some of which must be available anytime, and anywhere.
As your mobile delivery channel gains traction, more customers will regularly utilize their mobile device for simple transactions such as transferring funds, depositing checks, and checking balances (as you expect); however, you may also find that your front-line employees spend more time handling complex or difficult transactions. This potential issue was highlighted in a recent Gallup Research Report, which examines the banking channels customers use and for what tasks and how the delivery channel mix directly affects the health of each customer’s relationship with their bank.
In an effort to maximize your FIs customer relationships, you may want to revisit the June 2009 FFIEC Supplemental Guidance on Internet Banking Authentication. This guidance requires FIs to identify features for each online banking service and delivery channel, and to categorize online banking customers by service use. The next time you update this risk assessment, you may want to consider expanding the framework to include a similar analysis for other more traditional banking delivery channels. This may lead to new ways to combine high-tech with high-touch - think of the airlines manning their check-in kiosk areas with customer service representatives…
Forward thinking FIs keeping an eye out for changes in customer behavior may consider future utilization of video tellers and concierge type banking services. Alamo Federal Credit Union has recently launched such a service. An AFCU representative arrives in an AFCU branded SUV to meet members in person at their office, home, or coffee shop to open accounts, take and complete loan applications, help members switch from other FIs, and assist in setting up automatic bill pay or mobile services.
Could the “branch on wheels” concept be the panacea combo to satisfy the "Generation C" - always connected, communicating, content-centric, computerized, community-oriented consumer? Only a risk-based approach to Know Your Customer base will tell.
Author: James Key, JKey@jackhenry.com
Anyone who has been involved with IP telephony and Unified Communications in recent years has without a doubt come across the phrase "SIP trunking". For those of you not yet familiar with SIP, let’s start by giving a brief overview.
SIP stands for Session Initiation Protocol and is an application layer control protocol (signaling) used for creating, modifying, and terminating media sessions with one or more participants. These media sessions typically involve Voice over IP calls (VoIP), but can also include instant messaging, presence, and video conferencing. SIP is similar to other widely used protocols such as HTTP and SMTP in that it provides a flexible, open standard that can be leveraged efficiently with a variety of different Unified Communications systems and technologies.
SIP trunking is the technology that is expected to eventually replace traditional circuits and ultimately be the primary transport mechanism for voice traffic between an enterprise and the PSTN (Public Switched Telephone Network). Traditionally, enterprises would procure voice services separately from the data services. These voice services where delivered as bundles of physical wires from a telephone company and came in the form of a PRI (Primary Rate Interface), BRI (Basic Rate Interface) and/or POTS (Plain Old Telephone System) lines. With SIP trunking, an enterprise can potentially eliminate the need for these fixed PSTN lines and "funnel" all voice traffic over the existing data network to the service provider who then in turn routes it to the PSTN.
SIP trunking can provide many benefits over traditional circuits. Although all the benefits are far too numerous to list, the three more frequently discussed are as follows:
1. Cost reduction
Although cost reduction benefits can be argued and can greatly vary, there is the potential for reduction for multisite enterprises by centralizing SIP trunks, and eliminating the need for maintaining traditional circuits at each site. There is also the possibility of leveraging the already existing data network for voice. Technologies such as Metro Ethernet and MPLS, allow an enterprise to save money by making optimal use of current data network resources.
2. Disaster recovery/Business Continuity
SIP trunking gives the ability to easily redirect individual Direct Inward Dial (DID) numbers from one SIP trunk to another. An example would be a SIP trunk coming into the headquarters, and a SIP trunk coming into the DR facility. These trunks can be utilized to load balance inbound calls, and should either trunk become unavailable, the service provider can easily route all calls to the other trunk(s). With traditional circuits, these individual DIDs are typically confined to single sites PRI and must be forwarded by the telephone company to a designated number in the event of an emergency. The key point here is that with SIP trunking, inbound phone numbers are not confined to any single location.
3. Geographic number portability
DIDs are no longer confined to the local Exchange Carrier (LEC). If an office relocates to an area with a different LEC, those numbers can be re-presented across the new network.
SIP has been increasingly representing the underlying technology forming the foundation for Unified Communications solutions in today's modern enterprise. SIP has the potential to provide flexibility, significant costs savings, and increase network resiliency if properly tested and implemented. As with any new implementation, there may be some "bumps in the road", but these can be kept to a minimum and easily resolved with an experienced and well prepared technical team.
Do you have experience with SIP technology? We’d love to hear your story!
Author: Jeremy Taylor, JTaylor@jackhenry.com
At the beginning of 2013 with all the news regarding the fiscal cliff, and the woes that awaited our country if we were to “fall off” of it, I found myself thinking about a similar scenario I see play out time and time again in the IT industry: the IT systems cliff, also known as the catastrophic system failure.
Systems today have become so complex that they are often difficult to maintain, and even harder to troubleshoot. There is a large number of hardware, software, and networking components that have to work together in order to ensure a particular application is presented properly to the user. Oftentimes a system failure is not simply the result of one single failure in this process; but rather multiple failures spanning several components and often built up over time. This can make troubleshooting and resolving these system failures very difficult and time consuming.
As technology has changed over the years, the IT industry has had to adapt to new methods of thinking in order to better approach system failures, and ensure the maximum amount of uptime in a given system. One of these new methods is often referred to as IT Management as a Service. This strategy allows one to maintain the heartbeat of their systems, and gather useful information of how a given system is behaving before a major failure occurs. This allows a great deal of catastrophic system failures to be caught and resolved long before the phone starts ringing off the hook with users reporting that they can’t log in.
While there are several methods available to IT administrators today that allow them to monitor and manage their systems, the challenge that many organizations are faced with is finding the time and resources available to perform this task. One of the benefits to an ITMaaS strategy is that you can rely on the skills and expertise of seasoned IT engineers to manage your network, which then frees you up to do other tasks. Partnering with an ITMaaS provider makes avoiding a full system failure much easier, and provides peace of mind knowing that you have a large array of IT knowledge at your disposal. In essence, you are employing a full IT staff complete with engineers well versed in today’s leading technologies. This gives you the assurance that these small component failures will be caught early on and addressed, before they have the opportunity to snowball into larger issues, and ultimately system down catastrophes.
So, as we have all taken a sigh of relief about avoiding the nation’s “fiscal cliff”, consider how you can best prepare your organization to also avoid the “IT systems cliff”.
Author: Karen Crumbley, email@example.com
After working with Financial Institutions (FIs) since June 2011 on compliance objectives of the FFIEC’s Supplement to Authentication Guidance, it has become clear that many FIs are still struggling with the best way to address the guidance in order to provide customer awareness and education. There appears to be a gap between the FIs providing educational materials to their customers and their customers acknowledging their receipt and understanding of the materials.
Here are some of the reasons why I believe FI customers may be ignoring educational materials:
- The educational material is not compelling -
Regardless of the distribution method, the material simply fails to capture their attention. FIs utilize multiple distribution channels such as websites, brochures, statement stuffers, but with customers inundated with materials from multiple directions, educational materials are largely ignored.
- A strategic communication plan and messaging is missing -
Many FIs fail to create and follow a strategic roadmap for ongoing Customer Awareness and Education Program initiatives. The messaging begins to lack specific focus and does not create compelling reasons why customers should be attentive to the communications regarding the need for additional or enhanced technology controls to prevent/detect fraud.
- The Customer Awareness and Education Program is stuck on that “backburner” -
The Customer Awareness and Education Program component of the FFIEC guidance is not a priority, and other projects have taken precedence leaving enhancements in the conceptual phase.
- The FI is concerned that intentional efforts to encourage education may alienate business customers -
FIs do not want to imposition their customers by making education mandatory. As a result, many business customers are falsely under the impression that their accounts are protected and insured against fraud.
Here are some ways that FIs have had success with their Education and Awareness Program:
- FI management leverages unique delivery channels for communicating to their higher risk commercial customers -
FIs see this as an opportunity to build relationships. They utilize specific campaigns designed to create interest and a desire to learn more. Successful tactics include eblasts and emails, outbound phone calls, in person meetings, marketing campaigns combined with customer facing events like ‘ lunch and learns’, and web-based training to encourage customer participation.
- FIs engage internal stakeholders for support and buy in for an active Customer Awareness and Education Campaign -
As part of the strategic communication planning process, FIs identify, create and train internal cheerleaders who understand the purpose and importance of the campaign. As a result, the FI employees are knowledgeable and are able to engage customers to emphasize the importance and to further education and awareness.
- Educational material is promoted as a value-added service -
Instead of viewing the educational offerings as a burden to customers, FIs capitalize on education as a way to promote confidence and concern for the security of online banking transactions rather than an inconvenient feature and in this sense, embracing the guidance objectives as an opportunity rather than a burden.
An active Customer Awareness and Education program should be a strategic and ongoing initiative, designed to help your customers make the connection. They own a large part of the responsibility for the security of their online banking transactions and your FI’s participation in providing this valuable information to prevent and detect fraud can enhance and deepen the relationship with your customers.
I would love to hear your ideas for a successful Customer Awareness and Education Program.
Author: Brandon Kunz, BKunz@profitstars.com
Several years ago I participated in a hiking trip with a group of boy scouts to a lake not too far from where we lived. The hike occurred over several days and was a lot of fun. Two or three other leaders were there with me, and I remember one of them hiking behind me during part of the trip.
Later, when we discussed with the boys around the fire what they had learned during the hike and how it could apply to their daily lives, that particular leader offered up a “life’s lesson” as an example. He explained that when hiking behind me he noticed that I had longer legs than he did. He isn’t a particularly short guy, but I’m a little bit taller and happen to have long legs. He told the boys that it appeared clear to him that with longer legs I was able to travel just a little bit further than he did; each and every step of the way. Perhaps the difference was only an inch or so with each step, but the cumulative result was such that it was difficult for him to keep up.
He explained to the boys that by “lengthening our stride” in our responsibilities in daily life and doing just a little bit more, but doing so consistently, “with each step,” we would travel much further and faster and accomplish so much more in life.
Sometimes we can become overwhelmed thinking we need to make major investments in time and effort to do something; that a task or desire is just too far out of reach. Yet, many times the same task or desire can be realized by breaking it up into manageable chunks and applying a conscious and consistent effort to do just a little bit more each day.
In one’s personal life that might be reading 3 - 4 more pages a day, which would equate to over a thousand pages in learning each year, 3 - 4 worthwhile books. Running a few miles, three times a week equates to over 450 miles a year, enough to wear out a good pair of running shoes. Watching one-half hour less TV each night equates to about 15 hours of time saved each month, almost two full work days. 100 fewer calories a day equals a 10 pound loss each year (or 10 pounds not gained).
At NACHA this past week, reference was made to the saying; “How do you eat an elephant? One bite at a time.”
I think the first challenge is to determine which is the right elephant. The next challenge is to determine where to begin. Then you have to keep after it, day after day, week after week, until the goal is realized regardless of the challenges or obstacles that present themselves.
Proper planning, “lean” thinking, and the help of experienced consultants and mentors can help drive value earlier in the process and save missteps. For example, the Alogent group within ProfitStars works in an iterative, two-week development work cycle. At the end of each cycle we have the opportunity to see progress made toward each of our goals. On a periodic basis we are able to show that progress to key clients and use their feedback to determine whether to persevere or make adjustments. As components are created that deliver discrete value they can be released to market. That structure has served us very well, for many years, and has helped us apply our talents and our abilities on a consistent, ongoing basis to improving our solution offerings for the benefit of our clients.
And every once in a while, we get a chance to stop at the proverbial campfire, reflect, and realize that while we may have a long way to go, we’ve already accomplished much. Then, we get to determine what to tackle next and keep after it, day after day, week after week, doing just a little bit more each day, traveling further and faster.
Author: Debi Randol, firstname.lastname@example.org
After several years of working in a stable compliance environment, I started to notice a change. Around June 2011 the FFIEC released the Supplement to Authentication in an Internet Banking Environment, and Financial Institutions (FIs) struggled with adopting the new guidelines. Things were just beginning to settle and then the FFIEC released a new host of proposed guidelines in January of this year for Social Media Communication management. After reviewing the feedback that FIs submitted to the FFIEC in response to the proposed Social Media guidelines, it appears that FIs are growing jaded from regulatory requirements. I read quotes like “You are regulating us to death!”, “Adding more laws and entities are ridiculous!”, and “Do we really need another policy?”
The truth is I can empathize with FIs because IT Regulatory Compliance expectations are high. I can understand how community banks feel, “overburdened and overregulated”. I have even heard in jest that, “bankers can’t be bankers anymore because they are too busy with policies and risk assessments”. However, I also fully understand the importance of IT Regulatory Guidance. I also know that being unprepared for an exam or audit is not a valid option. Trust me, I have some experience with assisting FIs prepare at the last minute or the week prior to an exam or audit and they are overwhelmed. All things considered, preparing for the next wave of guidance would be to the FIs advantage. Since Social Media Communication is still a new medium, it presents unique risks. For example:
- How do we keep customers and FI personnel from posting non-public information?
- How do we address record retention and vendor management when the vendors that provide these services are not traditional FI vendors?
- What do we do if our social media page domain is hacked for the purpose of identity theft that steals FI customer’s credentials?
- What about advertising regulations and employee acceptable use?
Regulatory bodies have recognized that these questions need to be addressed. So what does all of this mean? First of all, it’s important to note that the guidance does not impose additional obligations on FIs. The responsibility to manage the potential risks associated with social media usage and access is no different from that which is required for any new product or service. In addition, the pending guidance is expected to require a risk management program to be in place to identify, measure, and control the risks related to social media – even if your financial institution is not actively participating in this arena.
It will be beneficial for your FI to plan and formalize a strategy now, if you have not done so already. Is your FI going to actively participate in social media communication? If yes, what do you wish to accomplish from it, and how are you going to measure those accomplishments? These can be the building blocks for your policies, procedures, and employee training.
I strongly recommend not delegating this responsibility to one individual, as it merits the attention of more than one stakeholder. Social media is far reaching and needs to be a group effort. First, get your board and senior management approval and involvement. Then, with all the regulations that intertwine with social media (17 and counting) make sure you are involving your compliance department or vendor. Recognizing the regulatory requirements and guidance for social media communication and involving key individuals is potentially the most difficult step. Once you have made the commitment to address social media guidance, then you will find that as with anything new it will soon become part of your regular processes and procedures.
Are you ready to take the next step for planning your social media communication strategy?