31 October 2014

AndyB

Andy Brown - Alaric Systems

13 | posts 37,937 | views 6 | comments

2013 Bank IT spend to grow - but too much in maintenance

05 February 2013  |  2565 views  |  1

Industry analysts at Ovum have predicted growth of 3.4% in the IT spend of retail banks around the world in 2013 – following fast on the heels of Celent’s predictions last month of the same growth for total bank IT spend. Whilst this is obviously good news for those in the fintech space, it is worth diving into the predictions a bit deeper.

The Ovum report predicts that mobile services and banking will see a 4% increase in Europe this year, and will rise at CAGR of 6% between 2013 and 2017. This is great news for customers who expect their financial services providers to move with the times – they can hope to see more and more banking services and payment options via their mobile phones. (Given First Direct’s failings with its mobile apps, we can see we’re clearly not there yet!) Financial institutions need to be able to offer payments, balance enquiries, money transfers and other banking services, through a mobile handset – using technologies such as SMS or downloadable applications. While mobile services, to some people, may be just an add-on for high-street bank accounts, to others it provides a primary interaction point with their account. Indeed in countries with high levels of unbanked it will be the sole interaction point with their 'banking' provider.  With the growing popularity of tablet style devices screen sizes will allow more sophisticated functionality being delivered to the mobile user. 

Whilst investment in mobile technologies is growing, it is still a very small percentage of the IT spend made by banks. In fact, Celent predicted that 77.1% of investment in IT in 2013 will go towards maintenance. (Although this percentage is falling gradually).  This is a massive amount of money to spend simply to stand still.

The reason that maintenance costs are so high are because many banks are trying to ‘make do and mend’ with archaic technology that hasn’t moved with the times. They are constrained into expensive service deals with vendors to keep their, often highly customised, system up to date, or having to track down rare expensive developers who know the programming languages used on these systems that were first built twenty or thirty years ago.

These costs are throttling innovation, and is perhaps why we’re not seeing more banks really differentiate themselves from their competition when it comes to technology. Even in the mobile arena, financial institutions are going down one or two routes, and we’re not yet seeing anyone really stepping up and delivering something new and different. I’m sure that Celent and Ovum have got it right, and we’ll be seeing investments in IT spend grow over the coming years – here’s hoping that banks spend the money wisely.

TagsCardsRetail banking

Comments: (1)

James Tomaney - Q-ATM Ltd - London | 05 February, 2013, 09:38

Andy, I share your view on why maintenance costs are so high. But I'd go further and say that the typical bank's approach to systems lifecycles is as archaic as the technology, and ultimately that costs the bank even more in time and money.

Be the first to give this comment the thumbs up 0 thumb ups! (Log in to thumb up)
Comment on this story (membership required)
Log in to receive notifications when someone posts a comment

Latest posts from Andy

Predicting the future of money

02 April 2014  |  803 views  |  0  |  Recommends 0 TagsPaymentsInnovation

KISS of life for Wallets?

18 September 2013  |  1066 views  |  0  |  Recommends 0 TagsMobile & onlinePayments

New iPhone...but still no NFC

11 September 2013  |  1900 views  |  4  |  Recommends 0 TagsMobile & onlinePayments

Possible potholes in the road to mobile payments?

21 June 2013  |  4319 views  |  5  |  Recommends 0 TagsMobile & onlinePayments

Cashless in Southwark - but where is my watch?

20 March 2013  |  2765 views  |  4  |  Recommends 0 TagsPaymentsInnovation
name

Andy Brown

job title

Product Marketing Manager

company name

Alaric Systems

member since

2009

location

London

Summary profile See full profile »

Andy's expertise

What Andy reads
Andy writes about

Who is commenting on Andy's posts