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Hometown Advantage
Happy State Bank isn't just a façade of the Old West. The bank opened its wooden doors nearly a century ago in 1908. J. Pat Hickman led a group of investors to purchase the single-branch bank, then called First State Bank, in 1990. Chairman and CEO Hickman grew the bank throughout the tristate region of New Mexico, Oklahoma and the Texas panhandle by guiding it through a series of acquisitions.
Some newly competing banks carried the First State name, which led to the renaming of Happy State Bank a few years ago. (The bank takes its name from a nearby town called Happy, made famous in 1999 by the eponymous film Happy, Texas.) Today, Happy State claims 18,000 customers, a dozen branches, $470 million in assets and $40 million in annual revenue. That's still small potatoes compared with its biggest competitor, Amarillo National Bank. The latter holds more than half the market share in Amarillo, whereas Happy State Bank has a mere 3%. Throughout the panhandle, Happy State Bank can claim around 8% market share.
Despite high transaction fees and a large employee-to-asset-dollar ratio, good ole customer service helps Happy State hold its own. It caters to the country crowd, as is evident one day recently when a customer sporting a droopy mustache, blue jeans, leather boots with spurs, a bandana, and a cowboy hat stepped out of history and toward a teller to make a deposit. "Now, that's a real cowboy," James says. "These are our type of customers."
In 1999, old-fashioned banking executives begrudgingly poured resources into launching a Web banking service. "We had to do it," says Wells, adding that his two college-age children prefer banking online over traditional paper checks and printed statements. Even Wells is making the move to the Web. "My wife and I decided to start paying bills online at the first of the year," he says.
With the advent of its Web banking service, Happy State finally rode into the technology era. The bank expanded its IT department from one employee to five, which included hiring Duane Hall, a network coordinator and security sharpshooter, and promoting James, a local boy who started at the bank in 1993. Over the past few years, the bank has spent roughly $500,000 annually on technology equipment alone.
In its first year, some 500 customers enrolled in Happy State's Web banking service; today that number has grown to more than 4,500. The IT department constantly jockeys with online thieves who try to punch holes in the system with everything from pharming, phishing and spoofing schemes to malware and domain name server poisoning. "As we get bigger, security is going to become a primary function of the IT department," says Hall.
In response the bank has deployed a number of security measures to keep its online customers safe. Customers are mailed a logon ID and password, and banking sessions employ Netscape Secure Sockets Layer to secure transactions between a customer's browser and the bank's firewall-protected Web server. Cookies are used as an additional layer of authentication and identification.
But cookies are just one way of authenticating a customer. Other methods range from costly biometric devices to smart tokens to public-key infrastructure credentials. Banks often choose authentication methods that best fit their customer profile. Technology Credit Union, a midsized financial cooperative in Silicon Valley, deployed biometric fingerprint readers to customers a couple of years ago, citing its technology-savvy members as being agreeable to such devices. Cookies, on the other hand, run behind the scenes often without the user's knowledge.
Meanwhile, software vendors continue to circle the wagons with new offerings and outsourcing partnerships for financial institutions. Leading players include RSA Security Inc., which was recently acquired by EMC Corp.; it offers a transaction anomaly detection application that flags transactions that don't match a customer's historical behavior. An authentication platform from PassMark Software supports 14 million online banking customers. Many banking IT vendors have also partnered with outsourcers such as Certegy Inc., which provides Web banking services to midsized banks.
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