Bank IT investment hits billions globally

IT budgets in the global retail banking industry will reach $131 billion in 2015, an increase of 4.3% over the previous year, says Ovum.

This will rise to $157.6 billion by 2019, driven by improvements in the global macroeconomic outlook, which has caused banks to focus on growth, rather than cost reduction and compliance-centric projects.

Leaders by level and growth

In 2015, Ovum predicts, global spending will be led by Europe and North America, but growth will be most rapid in Asia and Middle East/Africa. Spending by banks in the U.S. and Canada will reach $50.5 billion in 2015, a 4.7% increase from last year.

This is driven specifically by U.S. economic growth. Due to instability issues in the Eurozone, budgets in Europe will only rise by 3.1% in 2015, driving total spending to $42.4 billion. This does mask the disparity between different countries in the continent though, as Europe will still account for 32% of global retail bank IT spending.

Asia and the Middle East and Africa will see the largest growth this year, according to Ovum. Total budget in the former will reach $27.5 billion in 2015, a rise of 5.6% from 2014, while MEA will grow by 5.3%, reaching $2.4 billion. In Asia, this growth will be driven by the continued development of the banking sector in India and China, with Malaysia being another country on the rise. In the Middle East, the fluctuations in oil prices will act as a brake on the pace of growth, but there will still be solid levels of IT investment.

Where money will go

The trend of investment in digital channels will continue in 2015. Mobile banking will see the largest increase in budgets, with a growth of 7.3% over 2014, seeing total spend reach $4.2 billion this year. Online banking will rise by 7%, but its total spending will be higher than mobile, reaching $10.8 billion in 2015.

As the industry maintains its strong focus on sales and servicing, multichannel integration and customer information systems spending will see a global growth rate of 5.6%, pushing this year’s total to $7.3 billion.

“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. In 2015, this will remain a critical investment, with retail banks spending $22 billion on core banking projects. This is an increase of 4% from 2014 and it will continue to grow, reaching $26.2 billion in 2019.