Mobile to dominate rise in retail bank IT spending

Further evidence that bank IT spending is growing again comes from industry analysts at Ovum, which is predicting overall growth of 3.4% among retail banks, reaching $118.6 billion in 2013, as they focus on “customer satisfaction and revenue growth”.

European banks are lagging behind their North American and Asia Pacific counterparts, with just 1.8% growth expected, compared to 3.3% and 5.1%, respectively, but this masks a substantial growth in spending on mobile technology, which is expected to grow at 4% in Europe.

This overall growth figure is identical to that given by research and consulting firm Celent, which last month said total bank IT spending would grow 3.4% to $179.2 billion. It was even less optimistic about European banks’ plans than Ovum, predicting just 0.4% growth there, compared to 4.4% in North America and 5.9% in Asia Pacific.

In a new report, European Retail Banking Technology Investment Strategies 2013, Ovum says that within Europe, the optimistic shift towards greater IT spending signals “a reduction of the cost-cutting measures seen previously by the global banking industry”. Instead, a 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”.

Among the digital channels, “mobile banking is the clear IT investment priority in 2013, as retail banks attempt to capitalise on the features unique to mobile, such as location-based services”. Ovum’s forecasts show that what it categorises as “Other Channels”, which includes mobile banking, will grow 4.0% in Europe in 2013, and rise at a compound annual growth rate of 6% between 2013 and 2017. Overall, spending on online channels in this region (including traditional online banking services and mobile-browser-based banking services) is set to grow 4.2% in 2013. In parallel, to compete in the digital world, a number of retail banks will shift their ‘bricks and mortar’ marketing activities online.

Away from mobile, the report finds that that credit risk management and data privacy will become key regulatory compliance drivers of IT spending in 2013, with global investment into management information systems predicted to reach $6.4 billion over the course of the year, and $2.2 billion of spending in Europe alone over this year. This accounts for 5.5% of overall IT spending by European banks.

Jaroslaw Knapik, senior analyst, Financial Services Technology, Ovum, commented: “The optimistic signs on the economic horizon are driving the shift away from cost-cutting and towards investment strategies within the retail banking sector. Whilst regulatory compliance has certainly fuelled a significant amount of the investment predicted in our forecasts, it is by no means the sole driver. 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.