Annual spending on IT among global retail banks is expected to increase $3.6bn in 2012, as firms attempt to increase revenues and meet regulatory changes.
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An Ovum study predicts overall global growth of 3.2% this year, compared with a meagre 1.9% in Western Europe and a substantial 8.3% in Asia-Pacific. By the end of 2015, global IT spending by retail banks will hit $135bn, according to Ovum.
The increase will mainly be driven by banks attempting to increase sales, but a need to meet new regulatory frameworks will force banks to spend more on IT.
“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,” said Jaroslaw Knapik, Ovum financial services analyst and author of the forecast.
He said banks' attempts to increase sales will mean heavy investment in delivery channels, particularly online services. Spending on online banking will increase by 5.3% in 2012, to reach $8.3bn. Spending on mobile banking will grow 5%, to reach $3.3bn.
Hot areas for investment
“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,” said 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.”
Global spending in areas such as risk management, anti-fraud, compliance and performance management will experience growth of 4.6%, hitting $6.1bn by the end of 2012 and $7.6bn over the next five years. “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,” said Knapik.
UK banks face the prospect of a regulation that will force them to separate their investment and retail arms. The separation plans are now expected to be completed in 2015.