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In 2014, the financial industry will spend US$6.57 billion on software and IT services for credit risk management

IDC Financial Insights announced the availability of a new IDC MarketScape report, “IDC MarketScape: Worldwide Credit Risk Analytics Solution Vendor Assessment 2014”, (Document #FI252132), which evaluates nine vendors offering products and services within the credit risk analytics solutions market. The new report provides an indispensable tool for risk and analytics professionals, and their technology counterparts seeking a quick and thorough assessment of leading credit risk offerings, to understand the present capabilities and growth strategies, and obtain insights on IDC Financial Insights’ opinions of the strengths and challenges of vendors in this market. Vendors featured in this report include: FICO, Fiserv, IBM Risk Analytics, Misys, Moody’s Analytics, Oracle, SAP, SAS Institute, and SunGard.

While recent years of financial stress and uneven markets have decayed the growth in technology budgets, risk and compliance continues as a priority, with credit risk analytics and infrastructure investments growing at above average rates. In fact, the financial industry as a whole (inclusive of the commercial and retail banks, capital market institutions and insurers) will spend US$6.57 billion on software and IT services for credit risk management in 2014, representing 17.9% of the total investments on all risk management software and services spending. IDC Financial Insights projects this figure expanding on a three-year compound average growth rate (CAGR) of 9% through to 2018.

Specific credit risk investments are being directed at:

  • Architecting enterprise analytics across credit product, portfolio, and regulatory capital functions
  • Creating more effective credit operations and underwriting methodologies;
  • Improving credit capacity and debt collection capabilities;
  • Supporting stress testing and capital reporting
  • Providing more granular client profitability assessment; and
  • Enhancing decision making in areas such as pricing and capital allocation.

As discussed in the report, key decision imperatives for credit risk investments have moved beyond capital reporting and compliance. Today and in the future, institutions look to these solutions as front-to-back office analytics infrastructure, supporting retail, commercial, treasury, and financial performance needs of the institutions, and delivering efficiencies and bottom-line business benefits to pan-enterprise functions. Market leaders in banking are increasingly investing in these technologies as a first step in core banking modernization, to better price products, assess credit exposures more proactively, and aligned bank relationships more closely with the credit appetite of customers.

According to Li-May Chew and Michael Versace, part of the Worldwide Risk Management Strategies team at IDC Financial Insights, “Credit risk is the largest, most elementary risk faced by financial institutions. Leading financial institutions have made measurable headway in laying the foundation for a robust credit risk management system following lessons learned from the global financial crisis. Astute organizations positioning credit analytics as one of their core competitive differentiation will benefit from our insight around innovations and investments that these nine enterprising risk solution providers are undertaking to enhance their credit risk management offerings.”

Data from this new report indicates that the featured vendors demonstrate key positive commonalities including:

  • Commitment in helping clients modernize risk infrastructures by placing analytic platforms and capabilities at the core of transformation initiatives;
  • Commendable expertise and experience in credit analysis;
  • Proactive posture in expanding partnership arrangements for customer acquisition;
  • Receptiveness to making strategic acquisitions to further enhance their risk management capabilities; and
  • Solidification of forays into the Big Data and cloud computing environment.

IDC MarketScape criteria selection, weightings, and vendor scores represent well-researched IDC judgment about the market and specific vendors. IDC analysts tailor the range of standard characteristics by which vendors are measured through structured discussions, surveys, and interviews with market leaders, participants and end users. Market weightings are based on user interviews, buyer surveys and the input of a review board of IDC experts in each market. IDC analysts base individual vendor scores, and ultimately vendor positions within the IDC MarketScape, on detailed surveys and interviews with the vendors, publicly available information and end-user experiences in an effort to provide an accurate and consistent assessment of each vendor’s characteristics, behavior and capability.