Ovum reveals retail banking IT spend to hit $118.6bn in 2013

Retail banks across the globe will see IT spending grow 3.4 percent, reaching US$118.6bn in 2013, as CIOs focus on customer satisfaction and revenue growth. This is according to global industry analysts Ovum, which finds that European banks are lagging behind their North American and Asia-Pacific counterparts, with just 1.8 percent growth expected, compared to 3.3 percent and 5.1 percent, respectively.

In a new Business Trends report*, Ovum suggests that within Europe, the optimistic shift towards greater IT spending signals a reduction of the cost-cutting measures seen previously by the global banking industry. Instead, a focus on digital channels, such as online and mobile banking, and digital marketing activities, will enable them to improve customer satisfaction and revenue growth strategies and fuel cross-selling and upselling opportunities in the short and mid-term.

Among the digital channels, mobile banking is the clear IT investment priority in 2013, as retail banks attempt to capitalize on the features unique to mobile, such as location-based services. Ovum's forecasts** show the Other Channels*** category, which includes mobile banking, will grow 4.0 percent in Europe in 2013, and rise at a compound annual growth rate of 6 percent between 2013 and 2017. Overall, spending on online channels in this region (including traditional online banking services and mobile-browser-based banking services) is set to grow 4.2 percent in 2013. In parallel, to compete in the digital world, a number of retail banks will shift their 'bricks and mortar' marketing activities online.

Elsewhere, Ovum's Business Trends report reveals that credit risk management and data privacy will become key regulatory compliance drivers of IT spending in 2013, with global investment into Management Information Systems**** predicted to reach $6,4bn over the course of the year, and $2.2bn of spending in Europe alone over this year. This accounts for 5.5 percent of overall IT spending by European banks.

Jaroslaw Knapik, Senior Analyst, Financial Services Technology, Ovum, commented: "The optimistic signs on the economic horizon are driving the shift away from cost-cutting and towards investment strategies within the retail banking sector. Whilst regulatory compliance has certainly fuelled a significant amount of the investment predicted in our forecasts, it is by no means the sole driver. The level of investment in digital channels gives a clear indication that banks are fully cognizant of the growing expectations of their customers, as well as the opportunities they present."

*Business Trends: European Retail Banking Technology Investment Strategies 2013
**Forecast: Retail Banking Technology Spending Model Through 2017

Definitions

***Other Channels - This definition embraces spending on mobile phone services where content is delivered via the SMS (short message service) protocol, interactive mobile phone banking, and on delivering content to other access devices, notably personal digital assistants (PDAs). Moreover, the definition includes other channels such as TV banking, independent financial advisors, or other third-party providers.
****Management Information Systems - MIS are used to provide various layers of management decision-makers with the information required and typically take feeds from a series of other data sets generated around the business.