US banks pump $16.6bn into digital transformation

US banks pump $16.6bn into digital transformation

American retail banks will spend $16.6 billion on "digital transformation initiatives" this year, according to research from IDC Financial Insights.

As the retail banking delivery model is upended, financial institutions will increasingly focus their budgets on digital transformation, with spending growing at a compound annual growth rate of 10.4% into 2019, predicts IDC.

This compares to a growth rate of just 3.9% for overall IT spending by US banks, meaning that within five years a third of tech budget will be dedicated to bringing the industry into the digital age.

The highest growth in digital transformation spending comes from software and internal IT, with tech services also seeing a big leap and only hardware lagging. Spending on consumer initiatives and infrastructure improvements will continue to lead the way, while payments will also see a healthy proportion of spend as well.

Jerry Silva, global banking research director, IDC Financial Insights, says that investment is happening from two opposite ends of banks, with line of business executives buying consumer-facing tech while the CIO and IT groups try to transform the bank's infrastructure from the inside out.

"It's like two teams of diggers making their way through a mountain to build a tunnel. They're hoping they'll be aligned when they meet in the middle and it's a $16.6 billion bet," says Silva.

Comments: (2)

A Finextra member
A Finextra member 01 July, 2015, 18:43Be the first to give this comment the thumbs up 0 likes

Making somewhat accurate forecasts for almost anything is really hard. Lots of variables. I noticed a report by IDC competitor Gartner stating that over IT spending has surprised them as being down....perhaps the key take-away isn't the number, but the fact that banks have realized that they need to get it together with regard to digital banking.

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 02 July, 2015, 15:49Be the first to give this comment the thumbs up 0 likes

@ChrisY + 1. Besides, the only area in which the Gartner report ( forecasts an increase in spend is "stronger than expected mainframe refresh"! The LOB execs might just reach the middle of the tunnel and find spanking new mainframes waiting for them on the IT side!