IT spending in retail banking to increase

by CXOtoday Staff    Jan 18, 2012

currencyInvestment in online banking will become the fastest growing area globally, rising 5.3 percent, says research firm Ovum.

Global spending on retail banking technology will increase by $3.6 billion, a rise of 3.2 percent in 2012, and will hit $135 billion over the next five years, according to research firm Ovum.

In a new study titled Retail Banking Technology Spending Model Through 2016: Business Function Segmentation, 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 percent in 2012, hitting $10.2 billion by the end of the year.

“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.”

The study says that 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 percent, to hit $8.3 billion by year end. Elsewhere, mobile will see an increase of five percent globally in 2012, reaching $3.3 billion, while management information systems and multi-channel integration/customer information systems will witness 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 percent, hitting $6.1 billion by the end of 2012 and $7.6 billion over the next five years. However, emerging economies in Asia-Pacific will experience the highest growth, at 8.8 percent to hit $521million by year end, although North America will grow the fastest by volume, an increase of $95 million, reaching $2.2billion.

“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.

The forecast finds that Western Europe will have the lowest growth of all the regions, arise of 1.9 percent, despite being the second biggest market in terms of overall spend, reaching $44 billion by the end of 2012.