Digitalisation will double bank IT spending in next four years
Legacy replacement and digitalisation will double bank IT spending over the next four years, according to Gartner analysts – though it will decline in the short-term.
The medium-term figures suggest a reversal of trajectory compared to the short-term numbers, which show that IT budgets in banking will decrease by 2.4% this year to $486.3 million, driven in part by the rising US dollar and the slowdown in the BRIC markets. But this year’s figures aside, the industry is set for explosive growth over the next four years, according to the firm’s report.
“As banks grapple with growth and regulation issues, while battling new financial technology competitors, they will also look to invest in data solutions, driven by availability of big data, analytics tools and competition from fintech companies that rely on big data and analytics more to reach the right customer and analyse the risks,” said Rajesh Kandaswamy, research director at Gartner. “Cyber-security remains an area of focus for executives in consumer banking segments, while an emerging area of interest is smart machine technology, including artificial intelligence, robotic process automation, intelligent analytics and deep learning.”
In the short-term, the numbers for banking mirror those for other industry verticals, such as healthcare and retail, the latter of which has knock-on effects on retail banking and payments. Overall IT spending in the retail sector is forecast to decline 1.5% in 2015, but technologies that help understand customers better, improve engagement through multichannel experience and facilitate the buying process are high-priority areas, according to Gartner. Within stores, creating IT infrastructure to accept various mobile payment systems and digital wallets will be high-priority items in the second half of 2015.
Gartner ascribes the short-term downward blip to global currency fluctuations that have affected spending trends in 2015. “Appreciation of the US dollar (mainly against the euro, yen and the ruble), along with the relative slowdown of emerging markets (particularly Russia, Brazil and China), had a double impact on IT spending in 2015, and explains the downward revision in the forecast,” said Anurag Gupta, research vice president at Gartner. “Unsurprisingly, most technology firms reporting revenue in US dollars have taken a negative hit on their quarterly revenue earnings.”