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Retail banking - IT spending on the rise amid economic turmoil
In a new forecast*, the independent technology analyst reveals that banks in emerging economies in the Asia-Pacific region will grow the fastest, at a rate of 8.3 per cent in 2012, hitting $10.2bn by the end of the year. Meanwhile, Western Europe will have the lowest growth of all the regions (1.9 per cent), despite being the second biggest market in terms of overall spend, reaching $44bn by the e
"The technology investments will be mainly driven by the need to grow revenues but the changing regulatory compliance will also contribute significantly," says Jaroslaw Knapik, Ovum financial services analyst and author of the forecast. "Returning revenues to pre-recession levels will be a priority for a number of institutions, as too will be the focus on improving customer trust and increasing sales and servicing effectiveness."
This will lead to accelerated investment in channel technology, predominantly online banking, which will become the fastest growing area globally in 2012, rising 5.3 per cent, to hit $8.3bn by year end. Elsewhere, mobile will see an increase of 5% globally in 2012, reaching $3.3bn, while management information systems and multi-channel integration/customer information systems will also see high growth rates.
"Technologies that allow 'smarter' selling and servicing, such as customer analytics and customer data management, are expected to remain hot areas in the near future," comments Knapik. "As sales activities are expected to be on the rise again, banks will also boost investments into operations as the ability to sell products faster and service customers' better will continue to be a competitive differentiator in the retail market."
With risk and compliance permanently on the CIO agenda, ever-increasing regulatory expenditure, which in 2012 will be predominantly related to Dodd-Frank and Basell III, will drive investments into technologies that reduce costs, such as data management, business process management, business intelligence, and analytics.
Global spending in areas, such as risk management, anti-fraud, compliance, and performance management, will experience growth of 4.6 per cent, hitting $6.1bn by the end of 2012 and $7.6bn over the next five years. However, emerging economies in Asia-Pacific will experience the highest growth, at 8.8 per cent to hit $521m by year end, although North America will grow the fastest by volume, an increase of $95m, reaching $2.2bn.
"Regulatory demands are forcing banks to invest in their core systems. While in many cases tight compliance timescales lead to the 'quick-win' type of enhancement strategies, the ongoing nature of regulatory demands, together with the need to revamp the wider bank to allow the adoption of newer business models, is now driving significant interest in core system transformation," concludes Knapik.
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