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Japanese fintech spending to rise - study

12 May 2008  |  3968 views  |  0 cash

Spending on technology by Japan's banking sector approached US$14.7 billion in 2007 and will grow at a five-year compound annual growth rate (CAGR) of 4.2% to reach US$18.2 billion by early 2012, according to a study by Boston-based analyst Celent.

Total IT spending by Japanese banks will top Y1.27 trillion in March 2009 and approach Y1.5 trillion in March 2012, says Celent. From March 2008 to March 2012, a compound annual growth rate just under five per cent is expected.

But the analyst forecasts slowing growth after March 2011, when core banking system replacement by banks will plateau and reductions in system costs are expected. "During this period, the CAGR is forecast to slow to five per cent, with IT spending subsequently tracing a rapid decline," says Celent.

But until then so-called "city banks" in Japan will drive the growth and will be responsible for nearly 43% of total spending, says Celent. Regional banks and tier-two regional banks will account for just under 40% of total spending. Foreign banks will spend the least - slightly over two per cent of the total. Celent says this reflects the tendency by foreign banks to minimise spending in regional areas.

According to the study, expenditure allocated to external services at Y385.8 billion accounts for 33% of total spending, while expenditure on external software at Y50.7 billion accounts for just four per cent of the total spending.

Celent says spending on in-house development comes to Y382.8 billion, or 32% of the total. This highlights the comparatively high expense of systems development labour costs.

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