U.S. retail financial institutions including thrifts and credit unions will spend about $16.6 billion this year on digital information technology initiatives. IDC Financial Insights reported Monday (June 29).
The research firm said the initiatives will run the gamut from hardware to software to IT staff and serve the transition to digital functionality. Spending on such technology efforts will grow at a compounded annual rate of 10.4 percent through 2019, IDC said. That’s a much faster growth rate than the 3.9 percent that is estimated for overall info tech spending by U.S. banks overall.
The projections are part of a report titled “The Cost of Digital Transformation in U.S. Banking: The Critical Technology Investments in 2015 and Beyond.”
Digital transformation, which will take up about 24 percent of all info tech budget spend, remains necessary as financial firms must grapple with regulatory burdens, risk control and, of course, security concerns. As might be expected, the highest growth areas come from software and internal information technology needs. Likewise, IT services spend is growing faster than the overall industry at 8.5 percent, with only hardware keeping pace with the slower growth rates of the industry. Roughly 80 percent of the IT budget must go toward mandatory improvements in risk and compliance controls, with a significant portion of the remainder going to payments transformation.
And, notes IDC, the investment comes from what might be termed “two opposite ends” of the corporate spectrum, as one subset of spending comes from executives buying consumer-facing technology, while CIOs and IT groups look to change the very internal technology infrastructure of a given financial institution.
“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,” said Jerry Silva, global banking research director at IDC Financial Insights, in the statement detailing the report.