European financial services institutions are set to spend over $4.8 billion on business intelligence and analytics technology by 2006 as they attempt to tackle fraud and money laundering and comply with Basel II regulations, according to forecasts by Datamonitor.
The research shows that investment in analytics and business intelligence software - which includes customer intelligence, risk management, fraud, performance management, financial analysis and compliance - will grow at a compound annual growth rate of almost seven per cent between 2002 and 2006
Investment in compliance and risk management combined will increase by 9.5% during this time - the fastest growing areas - amounting to $1.7bn in 2006.
Banks will also increase spend on anti-money laundering (AML) solutions in order to prevent fines from regulators. Investment in fraud detection systems is expected to grow by an estimated 7.5% between now and 2006, when spend will reach $420m.
Datamonitor predicts that data management, enterprise resource planning (ERP) and customer relationship management (CRM) vendors will attempt to steal a stake of the market from traditional business intelligence and analytics firms by providing tailored Basel II, AML and other reporting and analysis solutions.
Daniel Lessner, Datamonitor financial services technology analyst, says: "The business intelligence and analytics industry, as most of the IT space, has seen some slower years recently.
"The financial services sector - traditionally the largest market for business intelligence and analytics - is going to play a pivotal part in fuelling this recovery in the coming years as banks and insurance companies are pressed to satisfy regulatory requirements and meet pressure from shareholders to provide a more complete picture of risk exposure, compliance and profitability."