A collection of observations, ruminations, predictions and random thoughts from Cornerstone Advisors.

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November 19, 2004 by Terence Roche Terence Roche

Peers and Loafing in Las Vegas

We were on approach at the edge of the desert, about a mile outside of Barstow when the caffeine began to take effect. There we were. Two travel-weary consultants drinking Southwest Airlines coffee as we headed for that grandmutha of all banking conferences – the BAI Retail Delivery Conference & Expo in Sin City ( Las Vegas, NV).


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It was Thursday, but the show had started on Monday. Both of us had the great fortune of leading energizing pre-conference workshops at the beginning of the week. As the picture at right of Jo Dee Martinez (Sandia Laboratory Federal Credit Union) illustrates, the crowds couldn’t get enough of our wisdom in those sessions.

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After the speaking gigs on Monday, we had to go back to our real jobs, but flew back on Thursday, November 18, to complete that annual ritual of parading through BAI’s gargantuan vendor showcase area. We were on a quest for both industry insights and cheap giveaway junk that we could “re-gift” during the holiday season. We also used the opportunity to conduct some business development for our consulting firm Cornerstone Advisors, Inc. As this picture of a representative of incentive tracking company Green illustrates, everyone was really interested in our sales pitch.

In addition to our sales efforts, Terence also spent a lot of time on the floor researching new industry products.

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What follows in no particular order are our random thoughts and observations from this year’s successful BAI Retail Delivery show…


The Disruptive Little Guys
Now here was a conference theme we hadn’t anticipated. Everyone from keynote speakers to money center executives was giving recognition to the competitive strength and staying power of smaller institutions, namely community banks and credit unions. JPMorgan Chase CIO Austin Adams deserves recognition for his humility and frank admission that big banks still haven’t figured out the right service and entrepreneurship formula. Headliner Tom Peters warned big bankers that they would have to work “10 times harder” than their smaller brethren to succeed.

For both speakers, the key was busting bureaucracy and giving the front line more power. Adams spoke of the need for “simulated entrepreneurship” inside large organizations, and Peters pointed out that GE was a successful large company only because it was more “disorganized” than any other.

Disruption and “bad ideas”
Michael Raynor, co-author of The Innovator’s Solution, dovetailed on the popular speech at 2002 BAI RDS by Clayton Christensen concerning innovation. The most important point Raynor made was that disruptive innovations typically start out as “bad” products targeted toward less desirable segments of the market. For this reason, corporate management often kills disruptive opportunities before they leave the starting blocks. Raynor encouraged bankers to be more willing to invest in R&D for disruptive ideas and to better distinguish these innovative opportunities from just plain bad ideas.

MICR, MICR Everywhere
It was quite surreal when we saw that Fiserv had hired a Donald Trump impersonator to speak on its Check 21 offerings. All over the RDS show, Check 21 was certainly hot. But really, how many vendors do we need that make machines to scan MICR checks in the branch? It seems every third booth had some small piece of hardware ready to digitize the ol’ check. The problem we see is that bankers aren’t jumping in yet with their own check and pen to buy this stuff. We don’t envision much in the way of branch capture equipment purchasing until 2006. Can anyone say industry consolidation?

“Sir, may I delight you while you use our self-service kiosk”
We saw a strange dichotomy play out this year. The business pundits and bankers at this year’s BAI were all waxing poetic about the need for world-class, personalized service. They used phrases like legendary “experiences” in their “stores” and the need to have “emotional impact” on customers. Meanwhile, the trade show floor buzzed with tons of self-service technology, designed to suck operating costs out of the retail delivery system. Is this another dessert topping vs. floor wax conundrum? Can banks have their cake and eat it too? Here’s our take: self service technology can work in the right context, but it also carries a serious risk of pissing off customers.

Take our Las Vegas cab driver as an example, who we’ll anonymously call Bob. When we mentioned we were headed to a banking conference, Bob quickly spat back to us, “I hate banks… why don’t you tell them to hire more people in their branches…I can’t stand waiting.” Bob bragged to us that he now uses an online bank and will never visit a branch again.

While all banks are committed to service on paper, each institution needs to have hard conversations about how it creates those dream “experiences” while it is mechanizing and sterilizing the branch environment. Not all self-service technology is annoying, of course. For instance, we loved having an airline check-in kiosk right at the convention center. Here’s Terence getting a Southwest “A” boarding pass well ahead of all those losers at the airport.


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And the least among us shall be reengineered
There was a lot of focus on systems designed to improve teller productivity. Kiosk machines that customers could use before going to get cash from the teller… cash disbursing machines that customers could go to after transacting with the teller… MICR readers that integrated with the teller system to automate screen population. Here’s our point – we’re fine with increasing teller productivity. But if you look around the bank at where the most productivity improvement opportunities exist, do tellers come to mind first? There are still excessively complex commercial lending issues being faced, tons of money being spent on cobbled information management systems, and lots of manual back office process. Why aren’t banks and technologists focusing more on these things? Is the biggest net pick-up really at the teller line?

Sales Reporting/Incentive Automation – the Glacier Moves!
Since we’ve complained about it every year, we’ll tip our hat. Many of the core system and stand-alone retail vendors have made progress in automating sales tracking, referrals, and reporting. There are some solutions that have at least helped in the tracking of deposit and consumer loan sales and some referrals. The next step is to figure out how to get the entire enterprise (i.e. the non-retail groups) on a single system that delivers the same capabilities. We’re moving forward, though…

Interesting Things We Saw
Our criteria for mentioning these things is that, um… we were walking around and, um… they looked interesting. With that precise scientific logic, we saw three things that caught our eye:

  • ASK has an automated, biometric and/or PIN-based self-service system for safe deposit box access. Now, there’s a process that needs automation.
  • Bancography still impresses with its affordable market analysis and mapping software. OK, we have mentioned this one before, but good is good.
  • Stephen Hughes of JPMorgan Chase and Vijay Balakrishnan of Alogent put together a heck of a case study on branch deposit automation. The integration of branch CAR/LAR image capture capability with teller work flow was quite remarkable.

The common theme? We love stuff that does one thing really well, and never mind the big picture.


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And the One That Had Us Scratching Our Heads
ATMs that accept coin deposits. Boy, the ATM manufacturers must be frustrated. Bus passes – flopped. Tickets for events – nope. Statement printing – yawn. Targeted one-on-one marketing – zzzzzzzzz. Now they can accept coins. These machines will be targeting niche markets like shopping mall merchants. Call us dim, but what exactly is the market need for this? We can only see one – the ailing slug industry needed something to revive its fortunes. Maybe this will help. Here’s Steve trying to grab some spare change and getting his hand caught in the coin-deposit ATM.

Best Vendor Giveaway
Actually, the team at Cornerstone doesn’t like to refer to them as giveaways, but rather as birthday and Christmas presents. Based on reactions monitored Thursday night from our seven-year-old judge (Emily Williams) – the slot-machine-shaped gumball dispensers given away by Digital Insight take the prize.


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Award for the most rabid GonzoBanker fan
We have to give a special tip of the hat to i-Flex’s Penny Richardson, who practically leapt from her booth to sing the praises of GonzoBanker, that world-renowned industry research source. We think you have incredible taste, Penny. Best of luck on i-Flex’s entry into the U.S. core systems market.


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Old friends…
The magic of the BAI show is that we ol’ fart bankers and technology vendors get to share a beer and talk about life in pinstripes. We saw loads of client and vendor friends and we were especially glad to see two longtime buds hanging out by the fake ATMs.

John Hairston, Chief Operating Officer of Hancock Bank ( Gulfport, MS), is a classic GonzoBanker – interested in new ideas but armed with a terrific B.S. meter. John was on the hunt for teller automation and BSA tools.


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David Dietz, CIO of Stillwater National Bank ( Stillwater, OK), was prowling the booths for new ideas as he puts together his long-term technology plan. We told David if he didn’t hire Cornerstone Advisors to help him, we’d call his CEO Rick Green and say we “have serious concerns about the direction David is taking.” Works every time for us spineless consultants. David bought us lunch.

Hardest Part of Having the Show in Las Vegas
Hiding gambling losses in expense accounts and making it look like you were working. We have great faith in our clients’ ability, though.

Farwell RDS… until next year
And so, the show ended for us… the line for taxis was nuts so a gang of us (an investment banker, two folks from a merchandising company and Lanis Robinson from Fiserv) decided to cram into a limo for a more classy and affordable ride to McCarren Airport. Back to the grind, but fired up to take on another year of technology and process improvements.

The team at GonzoBanker sends out our thanks to Alice Muncaster at BAI for letting us be part of the fun. Congrats to Tom Johnson and the whole BAI for another job well done.
-gb



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