Celent sees strong global growth in bank IT spending
Global IT spending by banks will grow 4.4% to $188.0 billion this year, largely driven by Asia Pacific, which is now the largest market, according to research by Celent.
The rate of increase is also up, from 3.9% in the period between 2012 and 2013, which Celent describes as “an encouraging indicator [that] is slightly higher than our original forecast”. The research firm says “the good news is that the momentum is positive and consistent, and will continue for the next few years”, with IT spending expected to grow by 4.6% in 2015 and 4.7% in 2016.
On a regional basis spending by banks in Asia-Pacific will grow by 5.8% in 2014 to $66.5 billion, remaining relatively consistent in 2015, and though it will decline slightly. IT spending will grow by 5.6% in 2015 to reach $70.2 billion.
North American bank spending will grow by a solid 4.5% in 2014 to $59.5 billion. In 2015 it will increase by 4.6% to $62.2 billion.
The firm has revised its European spending figures to reflect a 2013 situation “that improved throughout the year”, though it notes that “the forecast is not equally positive for all countries in the region”. The revised European figure for 2013 exceeds Celent’s original forecast for 2016, which it “believed would be the year when the storm passed”. Spending by European banks will grow 2.9% in 2014 to $62.1 billion. European spending growth will continue to ramp up through 2016 as spending increases by 4.3% to $67.1 billion.
Those clamouring for banks to address their ageing IT infrastructures might feel vindicated by Celent’s finding that of the total investment in IT in 2014, a “whopping” 76.3% ($143.4 billion) goes on maintenance, but it also notes that while it will remain “astronomical” for many years, it is “slowly creeping down” – it expects it to fall to 74.4% ($153.3 billion) in 2016.
Overall, however, “Byzantine legacy systems pervade banking and are a critical component of operations”.
|
North America |
Europe |
Asia Pacific |
| Creating value-added services | Improving onboarding solutions | Launching direct banking |
| Preparing infrastructure for componentisation, APIs, and partnerships | Improving self-service options | Adopting Big Data for risk management |
| Securing the bank | Payments regulation—revisiting cards | Launching P2P lending services |
| Complying with regulations | Complying with the next round of payments regulation –PSD II | Improving family office offerings |
| Putting customers first | Addressing billing management | Optimising supply chain financing |
| Optimising the branch portfolio | “Build your own” | Building a new B2Bpayments ecosystem |
| Building omnichannel delivery | Applying applied analytics | Implementing customer relationship pricing |
| Moving to mobile commerce from mobile payments | Revisiting supply chain | Emerging business models |
| Addressing the potential of Big Data | Enriching the transaction banking product portfolio | Adopting cloud computing |
| Replacing the core outside the Big 4? | Planning for real-time everything | Setting up community banks |
Spending priorities in different regions are also examined in the report, and seem to reflect the relative maturity of the markets, with the Asia Pacific less concerned with legacy issues.
In the US, retail banking will see new branch innovations as well as mobile banking investment, while spending in wholesale banking is starting to be directed towards cash and treasury management upgrades, particularly in mid-sized banks.
In Europe the 2.9% spending growth is across the board in terms of banking operations, but different countries are at different stages of recovery from the economic crisis and are not expected to show real growth until 2015.
“At a high level, though, the crisis seems to be in the rear-view mirror. It has not been
forgotten, but banks are looking forward, and believe that the future will be different,” the authors conclude.
IT Spending in Banking: a global perspective, by Jacob Jegher, Gareth Lodge, and Hua Zhang is available from www.celent.com
