New research reveals that retail and community banks are turning to IT to drive revenue and improve operations this year.
According to IT analyst and consultancy firm, Ovum, 43 percent of banks' senior IT executives supported revenue growth as one of the top three strategic priorities this year. Improving internal operations is a core process for 38 percent of banks surveyed. While focusing on the customer-facing aspects of business remain critical, banks hope to streamline back-end processes and enhance product conversions.
Overall, the London-based market research firm expects U.S. banks to spend 4.3 percent more on general IT this year than they did in 2014. As the digital age progresses, business operations are moving into virtual spaces and investing in technology that will help them get to know their clients better.
Banks in particular are spending more on IT projects this year, but the question is, where?
There's little arguing the importance security plays in the banking industry. Banks' customers rely on their local financial institutions to protect their hard-earned money; without a properly secure network, a bank's operation would crumble quickly. Jacob Jegher, research director at Celent Research told industry website American Banker he's seeing a massive uptick in spending on security and fraud technology initiatives in the financial industry.
"Financial institutions continue to fight the war against the fraudsters and it's on all fronts, across all channels," he said. "There are so many permutations and combinations of fraud, it's rapidly evolving."
Banks are moving quickly into the digital space not only to keep pace with consumer demands, but to also enhance back-end processes to shore up security and keep their customers' information safe. As fraudulent attacks continue to change in method and develop in stature, banks want to get ahead of cyber thieves and mitigate a potential breach before one occurs. Recent high-profile breaches at major retailers have a lot of banks - and businesses in general - shifting their IT spend dramatically toward information and payment security.
Ovum research found mobile and online banking - both of which fall under the digital banking umbrella - to be a top priority for domestic retail banks this year. In fact, more than 14 percent of respondents called both mobile and online banking projects the most important IT aspect they would invest in this year. Another 11.2 percent of respondents said both initiatives were a second priority among IT project investments in 2015.
Spending is expected to grow 7.5 percent this year for mobile banking and 7 percent for online banking, Ovum added.
As different means of payment and financial services technology emerge in the marketplace, banks will need to have the agility and flexibility to comply with these new developments. Retail banks must have the capabilities to provide an enhanced and seamless Omni channel customer experience that's consistent across various platforms. Today's consumer seeks a differentiated customer experience, but also expects quality service across different conduits. A recent Accenture study found 27 percent of bank customers surveyed would consider a branchless digital bank; that figure jumps to 39 percent for 18- to 39-year-old respondents.
It should come as no surprise that banks are investing in analytics projects this year. The information age is here, and banks need to equip their infrastructure with the right analytics tools. Accenture added that 48 percent of consumers are interested in spending analytics that is both forward looking and available in real time. Small and mid-sized financial institutions have a real opportunity when using analytics to create more relevant and personal relationships with their customers.
Ovum's research projects U.S. banks will spend nearly 6 percent more on analytics capabilities this year than in 2014, which points to the growing importance in customer data analysis on the back end. Fifty-one percent of Accenture respondents want their banks to proactively suggest products and services that suit their financial needs; with a robust analytics platform, banks may be able to do just that. Based on spending habits and income, banks can enhance client relationships and offer more valuable services to their consumers.