IT spending rises as banks transform their operations

Retail bank CIOs will see continued growth in their IT budgets over the next 4 years to help them meet the changing needs of their customers, according to new research by Ovum*. Investment will be concentrated on expanding core platforms and growth-supporting infrastructure, particularly in mature markets. A renewed focus on both digital banking channels and branch transformation will also drive IT spending, with channel investments a priority in countries with less developed banking sectors. These factors will drive global retail banking IT spending to $150 billion in 2018, a rise of 19.9% over the four years.

The financial crisis led to budget cuts and retrenchment in all areas of bank activity, with IT not exempt. Projects were mothballed or abandoned as CIOs were forced to deliver cost savings, but, as Europe and North America return to a more stable economic position, investment is rising. As a result, retail bank IT budgets are expected to grow at a 4.3% CAGR between 2014 and 2018. Banks headquartered in North America will continue to make the largest investments, spending $58.5 billion in 2018, compared to $47.3 billion in Europe and $32.3 billion in Asia.

Renewing core systems and improving digital banking channels will account for a significant share of global IT investment, as banks drive product innovation and comply with tighter regulatory frameworks.

“The top priority for CIOs is delivering customer-centric banking services, allowing them access to accounts at any time, in any place, and on any device,” says Kieran Hines, practice leader, financial services technology, Ovum. “This is driving investment in both the channels and core systems that support this. In addition, a more stringent regulatory environment place new reporting and risk oversight demands on banks. This is also an increasingly important factor in the investments made in core banking systems”.

At a regional level, North America will see the greatest absolute increase in IT budgets, but it is the Middle East and Africa which will see the most rapid growth, at a CAGR of 6.2% to 2018. Core systems and branch infrastructure will be the largest single budget areas, but investment in other digital channels will grow at close to 10%  CAGR, as banks look to capitalise on customer use of mobile technology.