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Banks in Sync With Digital Revolution

When Paul Rodeno began his career in banking in 1977, there wasn’t much technology around the office — other than what Ma Bell provided.

As the decades passed, the banking industry went through several generations of machines. Rodeno recalled the arrival of the IBM personal computer with floppy disks. Automated teller machines came into vogue, though Rodeno recalled that customers had their preferences: They liked to take money out but weren’t fond of putting money into the machines.

Today, clients bank with technology they provide themselves, such as home computers and smartphones.

The evolution of technology is continually changing the face of banking.

In 2011, people commonly use the Internet to look over bank statements, check balances or transfer money between accounts.

If you are running a bank these days, “you stand out if you don’t offer electronic services,” said David Ely, professor of finance at San Diego State University.

Services that let people deposit checks by photographing them with smartphones are becoming common. Electronic images have become a form of exchange, said Rodeno, who is president and CEO of Security Business Bank of San Diego. Rodeno said his customers scan checks in their offices then transmit them electronically to the bank. The original recipient keeps the paper checks then shreds them after two weeks.

Trailblazing Services

Banks have broken ground with other services.

Some aggregate bills for consumers, offering a one-stop online service that lets people pay charges from the utility company, the service station, the department store, or even the newspaper publisher/Web content publisher.

Banks are increasingly offering their services via the small screen of the mobile phone.

They also offer electronic funds transfers — the ability to transfer money from one account to another electronically. One of the services, which goes by the name Popmoney, lets individuals send funds to an account, a conventional email address or a mobile phone. Banks offering Popmoney include Bank of the West (part of Paris-based BNP Paribas Group), Citibank and U.S. Bank. Ally Bank, an Internet-only bank that previously went by the name GMAC Bank, also offers the service.

Behind the scenes of this digital revolution are software companies that cater to financial institutions.

One of them is Mitek Systems Inc., a small, publicly traded San Diego firm which specializes in check imaging. Mitek reported sales of $2.95 million in the quarter ended June 30, up from $822,000 in the year-ago quarter. Other vendors include Missouri-based Jack Henry & Associates Inc. and Wisconsin-based Fiserv Inc.

A Look Before Leaping

Rodeno, who caters to a business rather than a consumer base, said he has not gotten into mobile banking, but is evaluating more technology. He’s looking at a paperless bill payment system for small businesses. Of course, there has to be a business case to install the technology; Rodeno said the bank will evaluate the return on its investment and potential for profit.

Rodeno said he recently sprung for a program to increase security — which is a big concern. Security Business Bank now runs an artificial intelligence program able to spot inconsistent transactions. For example, it will raise a red flag if a person makes a transaction in San Diego, then a transaction in Fort Lauderdale, Fla., one hour later. The cost for that one layer of security? Rodeno said he paid between $20,000 and $30,000 to install the program and will pay monthly service charges to keep it going.

So are all the old ways of banking going the way of the silver dollar?

Not necessarily.

Ely, the San Diego State professor, says he thinks there is still a place for bank branches, since they offer opportunities for bankers to interact with customers, build relationships and, during conversation, cross-sell other products.

“People like having both” physical branches and electronic banking, he said, “even people who are tech savvy.”

The Bureau of Labor Statistics estimates the demand for bank tellers will grow slightly. Its Occupational Outlook Handbook, last updated in December 2009, estimated 600,500 jobs in the United States in 2008, and predicted the segment will grow 6 percent in the decade, to 638,000 jobs by 2018.

The estimate may seem outdated in the face of recent teller layoffs. Ely, however, said the forecast seems “reasonable” given a growing population.

Don’t look for personal secretaries to make a comeback, however. “Nobody has a personal secretary now,” said bank president Rodeno.

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