Financial services to hike IT spend

Tuesday 29 October 2013

IT contractors could see considerable benefits from rising technology investment in the global financial services sector, according to a fresh batch of reports from market analysts the International Data Corporation (IDC).

Over the course of 2014, the financial services industry around the world is expected to spend as much as $430 billion (£265 billion) on new IT products and services. Of this, around half will come from the banking sector, which is set to account for $215 billion of the total IT spend over the course of the year. According to IDC, this will driven by a selective approach to investing in the right projects.

“Bankers continue to be selective with IT initiatives, focusing on those that can deliver value to their clients and the organisation, while also satisfying the mandate of reducing costs and improving efficiency,” says Karen Massey, senior analysts, banking at IDC Financial Insights. She adds that in practice, this means risk and compliance projects will be high on the priorities list, as well as modernisation of both core and infrastructure.

As new banking regulations come into effect in the UK and around the world, it is likely that this will inspire wider organisational and systemic changes which require large IT transformation projects. But at the other end of the spectrum, Ms Massey says that projects aimed at improving the customer experience will also be important, as well as security.

Information protection and defending against cyber-crime continue to be crucial in businesses across all industries. Indeed, a new EY report published today (October 29th) shows that more than nine out of ten firms around the world are maintaining or raising their spending on cyber-security to combat threats that can emerge anywhere at any time. But half of respondents to the survey said they were being held back from creating value in this area by a lack of skilled resources - a shortage that contractors are in prime position to fill.

IDC’s reports also show that capital market companies will invest a further $110 billion of next year’s total. Again, risk and compliance will be among the priorities as regulatory changes take hold.

“As the global regulatory environment is still a hotbed of activity, the industry will see substantial investment in areas such as trader surveillance and operational risk projects as well as initiatives to increase automation in a bid to prevent human error and misconduct,” says Matt Sauer, research manager, global securities and investment strategies at IDC Financial Insights.

Although insurance remains a smaller sector in terms of IT spending, it may well be among the most promising for contractors - finally breaking the $100 billion mark next year, it is expected to register compound growth of four per cent a year up to 2017. The sector is likely to become much more technology-dependent in the next few years, according to Li-May Chew, associate research director at the firm - companies are under mounting pressure to cut their overheads, although customers are looking for more complex and customisable products and services.

“With the necessity for insurers to reinvent and simplify business processes to dramatically reduce cost; their policyholders demanding customised offerings, self-serve capabilities and availability of omni-channel touchpoints; and distributors wanting agency support, reliance on technology can only intensify,” she explained.

By Victoria McDonnell

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