Screen to Screen

Internet-based banks rely on technology to make customer connections
Independent Banker Magazine – by Becky Bergman

When his small Dallas bank was sold to Houston’s Sterling Bank in 2002, Patrick Adams never anticipated his next career move would be launching T Bank, a full service, high-tech community bank targeting primarily small business owners.

When it came to banks, Adams, a 20-year banking vet, knew “how to run one, fix one and sell one,” but wasn’t sure if he could actually start one, especially one driven by complex technologies.

The executive looked to California consultant Dan Hudson and his company, Bankmark for guidance in launching T Bank, which raised $16.8 million during its IPO prior to opening in November 2004. The bank now boasts $50 million in assets and execs say they anticipate reaching profitability this year.

Adams also established a strategic partnership with Fidelity Information Services to deploy its BancPac program, which streamlines various functions including global ATM access, check imaging, pre-paid cards, participation loans, debit cards, Internet banking and online bill pay. Adams structured T Bank to give business clients the ability to conduct all their banking transactions electronically from anywhere in the world using a computer and Internet connection.

The bank also provides its members free ATM access worldwide and even picks up the tab on usage fees from other banks. From deposits to check imaging to credit line applications, T Bank does it all without generating one sheet of paper.

“The advantage of a community bank should always be a closer relationship with clients,” says Adams. “But clients want the technology and products at the price offered by large banks. We want big bank technology with small bank delivery.”

“That’s why we’ve invested our shareholders’ money in two things: highly experienced people and technology that enables us to focus on our clients rather than on distractions like building maintenance and paperwork,” says Adams.

T Bank offers corporate customers the ability to deposit checks into their account from a remote location as well. Adams says the popular feature helps customers save time and travel expenses and attracts long-distance clients that might not otherwise have selected T Bank. By giving clients the tools to serve themselves on routine transactions—which is something they want—T Bank staffers are free to focus on other banking issues, according to Adams and analysts.

“We always take care of the clients that stop by in our branches, but banking does not have to still be another errand that you have to run in your car at lunch or on the way home,” says Thad Hutcheson, T Bank chief information officer.

“You can have the complete T Bank experience right from the desk at your home, office or an ATM nearby,” he adds. “In fact, we just had one business client switch to some of our remote technology services instead of crossing the street to wait in line at his local [Bank of America].”

The Right Staff
Adams, a conservative banker, recruited Hutcheson, a 28-year-old Computer Science major from Texas A&M University whose only banking experience involved balancing a checkbook. “Finding the right person to merge the available technology and changing the mindset of the rest of us was a big challenge,” Adams admits.

Hutcheson calls his lack of financial know-how an asset to the bank. “The biggest challenge is working with people who have an average of 20 or 30 years experience with the ‘doing it the way it’s always been done in banking mentality,’” says Hutcheson. “At T Bank we set out from the beginning to think outside the box, push the envelope and even shake things up a bit.”

By leveraging the Internet and state-of-the-art technology, the bank also has the ability to automate its entire back-end operations through its program. You won’t find a filing cabinet in the office or a worker trying to catch up on filing. Alenka Grealish, a manager for the banking sector at Celent Communications in San Francisco, encourages all de novo bank execs to structure the bank around technology from the get-go.

“When you build a bank around paper transactions, it’s very difficult to reconfigure everything. You will have to adjust the workflow, the reorganization and the training,” she says. “And it’s just not possible or even cost effective to switch from paper to electronic transactions all at once. It’s a process that can kill you. That’s why a lot of banks do one activity like loans or deposits at once.”

At the heart of the bank’s system is the Customer Information File, where bank service representatives create client records accessible throughout the banking organization. With just a click of a mouse, authorized staff members can view the whole relationship and see when the original document was created, who has viewed it and what changes were made to it, if any.

“By having the loan files in the document management system, people don’t waste their time going to and from the file room to access the documents,” says Hutcheson. “Customers like this because this cuts down the wait time for them.”

The technology driving T Bank also helps the bank stay up to date with regulatory compliance issues. “Because everything is automated, there is no risk to losing anything critical,” says Hutcheson. “And it only takes one person just a few seconds to do a word search and be able to retrieve the documents compared to having several people searching manually through a filing cabinet.”

Ken Silveira, executive vice president and chief technology officer for Silicon Valley-based Bridge Bank, agrees. “I believe compliance issues are actually easier to deal with when all your documents are stored and retrieved electronically. And if there are any red flags, you can see the history of the document and probably get your questions answered immediately.”

Bridge Bank, founded in 2001, has grown into a $535 millionasset bank with eight offices. Since last year, assets grew 34 percent; loans, 39 percent; and deposits, 33 percent. T Bank has also implemented a deposit platform that automates the origination and processing of checking, savings, certificates, IRAs and other deposit accounts, giving employees fast access to real-time client information including hold and stop payment alerts.

Grealish says she sees many existing banks converting specific areas over from paper to electronic one at a time. “I wouldn’t worry yet about making the transition from paper to electronic banking, but community banks should not want to be paper-based forever. And they shouldn’t wait forever to make the switch either.”

The 2005 ICBA Community Bank Technology Survey showed that 80 percent of the banks surveyed offer online bill pay; 61 percent allow clients to view imaged checks; 21 percent make it possible to apply for loans online while 9 percent said customers could apply for credit cards through the Web site.

Only 8 percent of the banks surveyed provide access to open a deposit account. “At the very least, every community bank should already be offering the ability to open a deposit account through its Web site,” says Grealish.