Friday, December 19, 2008

Inside Financial Services Technology

Analyst view of the banking sector's IT investments

By Mass High Tech staff

Financial Insights of Framingham, an IDC company, projects that IT spending by North American banks will slip by 4 percent from 2008 to 2009. However, Financial Insights notes that while overall IT spending is decreasing, the declines are not consistent across all spending categories or across all types and sizes of institutions.

The largest institutions, which account for a large share of IT spending, have been hit hardest by the credit crisis and economic problems. However, smaller banks and credit unions remain well-capitalized and are continuing with their technology investments. In addition, while spending will slip for several technology types, services are expected to be up, albeit slightly.

Key points:

• Bank spending on hardware will show a slight increase, but remains down over a six-year period (since 2004) with a compound annual growth rate of -2.4 percent. Banks are growing services spending at 1.3 percent CAGR, while cutting internal IT spending.

• Credit union spending on hardware is down at -2.5 percent CAGR, while services are up 1.5 percent.

• While the U.S. banking system is under pressure, Canadian banks remain well capitalized and are more likely to make acquisitions.

• Watch for more M&A activity involving U.S. banks, which will lead to IT spending related to integrating systems during 2009, although that spending will abate in 2010.