Bankers from all over New England attended Tuesday’s BankWorld conference in Cromwell. The event was sponsored by the Connecticut Bankers Association and The Warren Group, parent company of The Commercial Record.

Most bank executives follow a certain process when buying new software. They look at different product suites and try to figure out which will fit in best with their bank.

But that might not be the right way to do it, according to Matthew D. Pieniazek, president of Newburyport, Mass.-based Darling Consulting Group.

Pieniazek spoke to a group of bank executives at the annual BankWorld conference on Tuesday. BankWorld, a daylong event at the Radisson Hotel in Cromwell, drew bankers from all over New England. The Connecticut Bankers Association and The Warren Group, parent company of The Commercial Record, sponsored the event.

In addition to Pieniazek’s session, which was entitled “Forward Thinking in Today’s Economy,” experts from financial services companies addressed executives on topics ranging from lessons that average-performing banks can learn from high-performing banks to ATM channel priorities.

About 70 vendors were also on hand to share information about security systems, consulting services and other bank-specific industries. About 850 bank executives and workers in bank-related industries attended the conference.

‘Rational Expectations’

Pieniazek spoke to about 40 of the attendees on Tuesday afternoon.

With a little help from a PowerPoint presentation, he used a time machine to take listeners back to the past, to explore the old way of buying software and trends that have shaken up the banking world over the past several years; the present, where he talked about current trends; and the future, where he said third-party software inevitably will have an important place.

The mortgage refinance wave, commercial loan modifications, investment portfolio cash-flow volatility and several other trends have dominated the last several years, according to Pieniazek. Banks didn’t expect some of those trends, he noted.

“Most banks got caught by surprise,” he said.

A number of banks also neglected to analyze some trends. Many saw above-average deposits over the past several years, but haven’t bothered to figure out where some of them came from, Pieniazek said.

They should analyze that trend to determine if the people making those deposits come from a family with multiple accounts or if they are just using the bank for the time being. That would help banks plan for the future, Pieniazek said.

“To ignore it and make general assumptions can be extremely problematic,” he said.

Pieniazek also advised the executives to take a close look at yield curves. Having reliable data and analysis of the curve is important if banks want to survive when interest rates rise, he said.

“I think making decisions is about rational expectations,” he said.

Banks also need to analyze their relationships with their customers, he added, noting that it is important to be able to divide customers into segments in several different ways.

Bank executives should look at all those factors when deciding what computer systems they need to install, Pieniazek said. Good analysis will help determine what a bank needs and any good systems or software engineer will want to know what a bank needs before installing software, he said.

Banks also should consider present trends when making big decisions, like what software to buy, according to Pieniazek.

Uncertainty about interest rates, margins under pressure, loss of non-interest income, mergers and acquisitions in the industry and other trends are dominating the banking world right now, he said.

Banks need to research what could happen in the future with all those trends, especially in regards to margin pressure, Pieniazek said, adding that banks should develop contingency plans that include aggressive deposit rate reductions, investment portfolio strategy and others.

Pieniazek also made some predictions. There likely will be more mergers and acquisitions in the future, regulators will become stricter than they are now, banks will see more intense competition and there will be less time for executives to make decisions, according to Pieniazek.

Banks should adopt a new strategy when dealing with regulators, he said. Instead of handing them a “shoebox of taxes” and requiring regulators to spend a lot of time on site, banks should instead write a “story” about what has been happening. That would require regulators to spend less time on site and would streamline the process, he said.

The future also will require banks to look for outside partners for software work, spend more time on modeling for bank acquisitions, branch acquisitions and the economic value of equity and to make sure any systems or software are flexible enough to deal with any creative idea that might come up, Pieniazek said.