Technology spending by banking sector under heavy scrutiny

Peter Dinham
Thursday, 12 March 2009 05:06

IT Industry - Deals

There are some tough years ahead for vendors with IT spending by the banking sector likely to drop by more than $40 billion over the next five years and the UK expected to suffer the greatest fall as the economic downturn takes its toll on the world’s banks.

Datamonitor, a provider of online data, analytic and forecasting platforms, says in its latest report that it expects overall technology growth to remain depressed compared to pre-crisis forecasts up to 2012, removing over $40bn of what would have been IT spending from the banking sector, over next five years.

According to Datamonitor, the impact on the banking sector will be concentrated in European and North American markets, led by the UK, where banking technology spend will be the greatest, declining almost 7%.

Daniel Mayo, director of analysis for Datamonitor’s financial services technology, says that while IT budgets are under pressure, requirements are different to the last IT downturn cycle, after the dot com crash, when technology was particularly targeted for cost reduction.

Mayo says that for the banks post financial crisis, IT intensity - the ratio of IT cost to overall operating cost base - is likely to increase.

“Technology spend will reduce, but the need to obtain synergies from recent mergers and drive lower costs/ higher productivity elsewhere will protect budgets to some degree.”

According to Mayo, banks are realising the crisis is likely to drive a structural shift in the banking sector and future operating income growth and that this will eventually require a corresponding structural shift in the bank structures and organisational size.
CONTINUED page 2