• Thursday, February 29, 2024
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Risks, compliance efforts gulp financial services IT budget

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Series of worldwide information technology (IT) spending guides focusing on banking, capital markets, and insurance industries have revealed that risk and compliance efforts are still dictating which IT projects will be getting the green light at capital markets firms in 2014. Financial insights forecasts on worldwide financial services by the International Data Corporation (IDC) published at the weekend revealed that the sector IT spending will top $430 billion in 2014.

As the global regulatory environment is still a hotbed of activity, the report showed that 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.

The Financial Insights Report provided an analysis on the current status and projected growth of IT spending in the banking, capital markets, and insurance industries, published bi-annually, offer an outlook on IT spending over the next five years. It would be recalled that news circulated in Nigeria last week that Nigerian banks borrowed N2.5 trillion in August to cushion liquidity crisis.

While IDC report predicted that banks will account for half of the worldwide total in 2014 with IT spending in the tune of $215 billion, banks, discount houses and other financial institutions in Nigeria have gone on massive borrowing spree, increasing their borrowing from the Central Bank of Nigeria (CBN) by some 210 percent in one month in order to manage the liquidity crisis. IDC said that insurance companies will spend $100 billion on IT worldwide in 2014. Asia/Pacific, Latin America, Middle East and Africa will see growth exceeding 7 percent, while Europe and North America remain well below 5 percent.

Capital Markets firms will invest $110 billion in IT in 2014, with North America accounting for almost half of that amount. A five-year outlook on IT spending by banks, specialised banking institutions, and credit unions offers IT vendors key information needed to develop effective market strategies and measure growth areas. According to Karen Massey, senior Analyst, Banking, IDC Financial Insights, “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.

“Expect to see projects around risk and compliance, core and infrastructure modernisation, customer experience, and security, which are lifting our otherwise tempered forecasts.” Li-May Chew, associate research director, IDC Financial Insights, added that, “As the global economies continue to mend gradually and insurance markets harden, we expect insurers to continue prudently setting aside dollars for technology spending.

“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. We project global IT investments rising to $100 billion in 2014, with a 4.0 percent compound annual growth rate (CAGR) over the forecast period through 2017.”

Also, Matt Sauer, research manager, Global Securities and Investment Strategies, “As is the case across the financial services industry as a whole, risk and compliance efforts are still dictating which IT projects will be getting the green light at capital markets firms in 2014.

“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.”

The IDC Financial Insights’ IT Spending Guides are a benchmark tool with consistent, detailed market data on the corresponding industry and providing a profile of the IT growth opportunity segmented by technology components, solution categories, and institution types and sizes.

By: Ben Uzor, with wire reports