Banking and Securities IT Spending Will Decline 4.7 Percent in 2020 Before 2021 Rebound
Worldwide IT spending in the banking and securities sector is expected to decline nearly 4.7% to $514 billion in 2020, according to Gartner. Spending on devices such as PCs and mobile devices will see the largest decline, falling 12.1%, followed by data center systems.
“COVID-19 has not only caused uncertainty within the banking and securities industry this year, but also a defined shift in the way customers must interact with their financial institutions,” said Jeff Casey, senior director analyst at Gartner. “These firms continue to respond to the emerging needs of customers amid ongoing economic closure and dwindling government support.”
The industry’s initial response was dominated by operational actions to enable a remote workforce, responding to increased credit needs, digital channel education and reassuring unnerved investors. Customer service channels were placed under additional stress, with banks quickly responding by adding or adjusting capacity both in self-service channels and in staffed service channels. Gartner forecasts technology spending in the banking and securities industry to recover in 2021, growing 6.6% globally.
During the early stages of the pandemic, banks focused technology spending in four key areas. They have been spending in operations to ensure continued access to basic services; in supply chain to address emerging supplier and customer needs; in revenue to ensure continued viability of the business; and in workforce to support employees and remote working amongst disruption.
“With a better understanding of the impact of COVID-19, banks and securities firms are now accelerating automation initiatives, such as customer-facing chatbots, robotic process automation (RPA) and end-to-end account origination solutions,” said Casey. “They’re also focused on redesigning organization structures and workflows and reprioritizing modernization initiatives.”
Following strong growth of 5% in 2019, the impact of COVID-19 will see spending on IT services decline in 2020. Contract size, contract terms and deal type will be severely impacted, as large transformation projects are curtailed or canceled. “This will be short-lived as banks initially react and respond to COVID-19 disruption,” Casey said. “IT services spending will begin to rebound as banks accelerate reprioritized modernization initiatives in 2021.”
Gartner believes the ability to create new value and ultimately new sources of revenue will become critical to long-term success in an extended recovery. COVID-19 has presented an opportunity for banks to increase their digital engagement and broaden the services offered. Banks only currently derive 27% of revenue on average from externally delivered digital services, according to the 2020 Gartner CIO Survey.