The sub-prime credit crunch will drive retail bank spending on business intelligence (BI) technology from $5.6 billion in 2006 to $9 billion by 2012, according to a global study by market analyst Datamonitor.
The crunch, along with compliance requirements and an increasingly competitive business environment, is forcing banks in North America, Europe, the Middle East and Asia Pacific to devote more of their IT budgets to BI, says Datamonitor.
Banks stung by the sub-prime credit crisis - and resulting tightened money markets and gloomy economic climate - are looking to use BI technology to implement more thorough enforcement of lending procedures.
Areas such as risk management will represent the highest growth opportunities for BI technology. Datamonitor predicts retail bank spending on risk management technology will reach $1.76 billion by 2012. Banks will also look to integrate data stored in a variety of disparate data warehouses as well as legacy applications across several lines of business.
"BI functionality is growing in demand as it tracks and monitors operational risk, and provides a more sophisticated and consolidated picture of risk exposure across all divisions," says Jaroslaw Knapik, financial services technology analyst, Datamonitor.
Another BI area set to see increased spending is customer intelligence. With the tougher economic climate leading to an increasingly competitive retail banking market, banks are focusing on increasing efficiency of sales channels, improving customer services and maintaining high levels of client retention.
A front-office focus means that distribution channels and customer relationships are becoming increasingly critical, says Datamonitor. This will result in banks looking to BI technology to improve customer relationship and knowledge management and help them act on the information.
"Although traditionally utilised by just specialists, there is a growing trend towards pervasive use of BI technologies within solution areas such as risk management or customer intelligence. New approaches recognise the need to apply greater intelligence at both strategic and operational levels and make BI functionality available to a wider audience across channels such as branches or call centres and divisions like bank-assurance, private banking or retail brokerage," says Knapik.
Datamonitor predicted earlier this year that the sub-prime crisis will spur banks to increase spending on operational risk technology from $754 million in 2007 to over $1 billion in 2010 - an average annual increase of almost 12%.