European banks lag behind with investment deficit in mobile channels

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European banks lag behind with investment deficit in mobile channels

Karl Flinders

Global retail banks will increase their IT spending by 3.4% to $118.6bn in 2013 as they turn their attentions to improving customer satisfaction and increasing sales – but European banks could fall behind, investing less in new channels, according to research from Ovum.

European banks – which already lag behind bank IT investment in the US and Asia-Pacific – could fall further behind, with an increase in IT spending of 1.8% compared with 3.3% in North American and 5.1% in Asia.

In North America, banks will place less attention on cost-cutting measures, in favour of projects intended to exploit digital channels, said Ovum.

“Instead they will focus on digital channels, such as online and mobile banking, and digital marketing activities will enable them to improve customer satisfaction and revenue growth strategies and fuel cross-selling and upselling opportunities in the short and mid-term,” said the Ovum report.

The research showed that, in North America, mobile banking is the clear IT investment priority in 2013, as retail banks offer customers amenities such as location-based services.

Ovum said spending on mobile banking at North American banks will increase 6.7% in  2013 and rise 8.2% on average each year between 2013 and 2017.

Digital investment

Jaroslaw Knapik, senior analyst of financial services technology at Ovum, said optimism is driving a shift away from cost-cutting and towards investment strategies in the retail banking sector. 

“Whilst regulatory compliance has certainly fuelled a significant amount of the investment predicted in the forecast, it is by no means the sole driver," said Knapik.

"The level of investment in digital channels gives a clear indication that banks are fully cognisant of the growing expectations of their customers, as well as the opportunities they present.”

Case study: Nationwide

UK retail banks understand the importance of mobile banking. Tony Prestedge COO at Nationwide told Computer Weekly last year that customer satisfaction is one of the key metrics used to measure the banks performance. This is driving Nationwide’s investments in mobile and online banking platforms.

“The customer experience is vital,” Prestedge said. 

Nationwide measures customer experience and the results influence strategy: “Since upgrading our technology we have seen an uptick in customer satisfaction,” he said. 

Nationwide was less affected by the financial crisis than many of its competitors and stuck to a planned £1bn investment in IT, which included mobile banking investments as well as major upgrades to online banking.

Mobile banking on the UK

European banks already lag behind banks in Asia and North America in mobile banking. Speaking at a recent Ovum event in London, Daniel Mayo, financial services analyst at Ovum, said this year will see banks in the UK step up their interest in mobile banking. 

“It has taken a long time for European banks to realise that mobile banking is important, compared to Asia and North America, where there is real innovation,” Mayo said.

Ovum’s report also revealed that credit risk management and data privacy regulatory compliance will lead to $6.4bn global investment by retail banks in Management Information Systems in 2013. Financial services regulation is an industry in itself with 140,000 pages of regulations, impacting UK banks, published over the last two years.

 


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