Digital and core renewal to drive bank IT budget growth

Digital and core renewal to drive bank IT budget growth

Global retail banking IT spend is set to reach $131 billion by the end of 2015, driven largely by investment in mobile and digital channels and core platform renewal, according to figures from analyst house Ovum.

In 2015, global spending will be led by Europe and North America, predicts Ovum, but growth will be most rapid in Asia and MEA. Spending by banks in the US and Canada will reach $505.5 bn in 2015, a 4.7% increase from last year. Due to instability issues in the eurozone, budgets in Europe will only rise by 3.1% in 2015, driving total spending to $42.4bn. Despite the caution, Europe will still account for 32% of global retail bank IT spending.

It will be Asia and the Middle East and Africa (MEA) though that will see the largest growth this year, says the analyst house Total budget in the former will reach $27.5bn in 2015, a rise of 5.6% from 2015, while MEA will grow by 5.3% reaching $2.4bn.

Across all regions, mobile banking is predicted to see the largest increase in budgets, with a growth of 7.3% over 2014, hiking total spend to $4.2bn this year. Online banking will rise by seven percent, but the overall outlay will be higher than mobile, reaching $10.8bn in 2015. As the industry’s focus on sales and servicing remains strong, multi-channel integration and customer information systems (MI/CIS) spending will see a global growth rate of 5.6%, pushing this year’s total to $7.3bn.

“Data and analytics will be key to the developments in digital channels,” says Kieran Hines, practice lead, Financial Services Technology, Ovum. “Many markets are witnessing their second or third wave of mobile and online banking platforms, with driving revenue becoming the prime priority. In the next round of major platform developments though, it will be the use of data analytics in real-time that will act as the key differentiator.”

This change will be reflected by the spending growth in core platforms, she says. In 2015, this will remain a critical investment, with retail banks spending $22bn on core banking projects. This is an increase of four percent from 2014 and it will continue to grow, reaching $26.2bn in 2019.

Ovum sees no brake on the growth in IT spending over the next four years, with budgets set to reach $157.6bn by 2019, as core platform modernisation continues and the macro-economic outlook stays clear.

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