Less Than 500 Banks in the USA?

IT and Compliance are More Challenging to Manage

The CEO of Prosperity Bank in Houston, David Zalman, stated in an SNL Daily Dose article that there may only be 500 banks within 25 years due to the increased burden smaller banks have in managing IT and compliance.

We strongly disagree with Mr. Zalman’s prediction on the number of banks, but we do believe he is correct that IT and compliance are getting harder to manage and that these issues have a disproportionate impact on smaller banks. It is more challenging than ever before for banks to rely on only one or a handful of IT persons for the wide array of technical and IT regulatory issues that a bank has to deal with today. However, Mr. Zalman appears to make an incorrect assumption that any bank smaller than his ($22 billion) has to have all of these capabilities in-house.

They do not.

In fact, we would argue that banks utilizing BankOnIT’s full suite of technology services have more capabilities when it comes to their technology network than many $20 billion banks. Here is why: By supporting thousands of bank employees from traditional banks across eight different states, we are able to leverage economies of scale to provide more capabilities and better results. How would your bank benefit:

- If when deciding to expand you could make a single call and have multiple IT project managers, each one having managed a dozen other new branch bank openings or acquisitions over the past 12 months, available to assist with this project?

- If you wanted a new lending software application you no longer had to buy a server and worry about how to back it up. Instead, imagine if you made a call and had a server available in a couple of hours, with that server being hosted in a secure data center and already backed up to another data center?

- Or, what if you had a staff comprised of former examiners, bankers, a certified IT audit manager and a Harvard-educated banking law attorney who would help you prepare policies and risk assessments and be ready for your next IT exam or audit?

Following are comments from traditional bankers on how BankOnIT supports their financial institution in ways they couldn’t on their own.

“We chose BankOnIT to provide a secure, efficient and reliable way to support our bank’s growth while having the network capabilities of a multi-billion dollar bank – without the cost or challenges of building and running a multi-billion dollar IT department.”
- President and CEO of a Kansas bank

“For us, BankOnIT is not just an IT vendor but rather a business partner. With BankOnIT, traditional banks receive big-bank resources and capabilities.”
- President and CEO of an Oklahoma bank

“We chose BankOnIT to allow us to compete effectively against the largest banks in other markets.”
- Senior Vice President of a Kansas bank

One more thing - before we get to a point where there are only 500 banks in the USA, huge banks are going to have to figure out how to make acquisitions without driving billions of dollars in deposits, and the opportunities those customers represent for lending and other service revenue, through the front doors of traditional banks.