E-commerce and new technology are now seen as among the biggest business risks facing the banking industry.
The acceptance of IT as a major business issue has been highlighted in a global survey of the banking industry by the Centre for the Study of Financial Innovation (CSFI) and consultancy PricewaterhouseCoopers.
IT and e-commerce issues occupied three of the survey's top five industry concerns. In the same survey in 1998 IT only figured twice in the top 10 industry fears (see table).
The report also predicted that IT departments are set to grow in size and influence owing to a lack of understanding of technology issues among banking industry executives.
David Lascelles, co-director of the CSFI, said, "The role of IT people is coming out of the laboratory and moving into the boardroom. Directors need to have an understanding of technology and implementing the strategy."
He also called for software suppliers to do more to help their users understand emerging e-business technology through education programmes.
The annual survey is based on responses from nearly 200 bankers, regulators and analysts. It ranks the top 30 banking industry "banana skins" by their severity and whether they are seen as becoming more or less of a threat.
Concerns over IT broke down into three areas: e-commerce, grasp of new technology and high dependence on technology.
E-commerce fears focused on the expense of delivering e-banking, low customer take-up of e-banking and security.
The risk of hackers, technology failure and fraud were the main e-commerce security worries. One UK banker said, "The Internet could become an unsafe transaction area with the public blaming it on banks."
The industry's increasing dependence on technology was a new entry into the risk league. "Banks are now totally dependent on technology, yet few senior managers devote enough time to the risks related to that technology," said one senior executive at a US multinational banking group.
Banking industry's top 10 "banana skins"
|1||Equity market crash|
|4||Grasp of new technology|
|5||High dependence on technology|
|6||Banking market over-capacity|
|9||Competition from new entrants|
|10||Complex financial instruments|
|1||Poor risk management|
|10||Grasp of technology|
Source: CSFI, PricewaterhouseCoopers