Virtually all of my clients, no matter their size or sophistication, are struggling to deal with the same issue: How to manage technology?

There are at least two aspects to this problem. The most basic issue involves managing the ever-changing technology requirements that are necessary to compete; customer requirements never stop increasing as demands for one new “gotta have it” innovation follows another. The second problem is at least as intractable as the first: managing technology vendors. Increasingly, the largest vendors rather than the banks call the shots, determining what can be offered when and, in effect, holding banks hostage to their development schedules and execution capabilities.

The industry has to address both these issues if it is to operate with the flexibility and speed demanded by many customers and provided by the biggest banks and many nonbank players, the “shadow banks” that are becoming increasingly important both in lending and payments. Regional and community banks, operating with limited resources, face a much greater challenge than the largest banks.

First, how should banks decide which technologies to invest in and when? At most banks innovation seems to be mostly limited to technology areas with a constant stream of new delivery channels or ways of transacting business. Last Friday’s USA Today (quoting that newspaper is a sure sign I have been traveling too much) discusses campus use of the app Venmo, “which links bank accounts and allows for easy payment among friends.” The article continues, “Google, most major banks, Square Register, Clinkle, and Pay-Pal (which owns Venmo) are heavily investing in paying via the smart phone.” How many readers even recognize the names of all these vendors?

One research shop estimates that mobile payments totaled $235MM in 2013, just a blip on the payments landscape. But who knows how important a Venmo-like capability will be and how quickly, if ever, it becomes another cost of doing business, that is, an offer banks must provide to remain competitive while generating an uncertain, if any, revenue stream. The paragraph above notes that “most major banks” are investing in this area, however, there are only four-five major banks. The other close to 7,000 need to determine how to address this and similar choices.

How can banks make the determination of what to invest in and what to ignore? (Are video links the next big thing? What is?) In some cases, such as the above, banks may have no choice but to offer an additional capability, if they are to attract and retain the younger (lower than 40+) customer base. The price of admission for attracting and retaining some segments keeps rising, but where is the payoff? While the “major banks” (meaning very BIG) have the staff and the budgets and the economies of scale to assess and offer another payment method, most banks find themselves increasingly stretched.

Perhaps even more frustrating, when banks determine a product or channel they wish to offer, they need to depend upon their vendors to deliver it. Increasingly, banks are beholden to FIS and Fiserve with some banks feeling they are not their clients but their supplicants. These vendors often determine what capabilities banks can offer, when they will be available, and what features they will provide. Making changes to the product or their schedules can be difficult and/or expensive.

As the pace and cost of change increases and as these BIG players acquire start-ups and specialized software providers, most banks reliance on them has increased. Relatively few banks have developed the type of IT Enterprise strategy that allows them to augment their core systems with third party applications from other companies to provide better capabilities more quickly than the two big core companies provide.

Another issue centers on the lack of IT knowledge (and sometimes interest) that many bank CEOs possess. (Even more dangerous are the CEOs who think they understand technology when they don’t. Related to this area an attitude of humility and endless questioning is usually appropriate.) Too often, this results in reliance on IT staff that can frequently drive decisions without the close involvement of line personnel. We have even seen instances in which banks view their IT people as having “gone native”, in effect, becoming too close to the bank’s core provider and, thereby, not demanding enough of the vendor.

Banks should review their IT strategy to determine whether it provides the necessary flexibility and allows the bank to leverage all third-party providers. Senior management cannot ignore or throw up its collective hands at the complexity and density of the IT process. IT groups often fill a strategic gap because the line abandons (either by choice or due to intimidation) its own responsibility.

Bank technology is way too important to be left to the technologists. The best technologists agree with that view and encourage and even demand line involvement in shaping IT decisions. Arguably, no other area is as misunderstood, as expensive, and as critical to a bank’s success than technology management. Today, IT issues cut across virtually all segments, products, and delivery channels. Line and executive officers have to deal with the frustration and opacity of this area and take command of the vendors that serve it to direct their bank’s future.