Improving economic outlook leads banks to focus on digital channels
Retail bank IT investment in 2015 will be focused squarely on driving revenue growth, according to new research from Ovum, the global analyst house. Digital channels will be at the heart of this activity, particularly as the improving economy has meant reducing costs and headcount is no longer a priority. The large majority of investment made in 2015 will be focused on progressing with an omnichannel experience for customers.
As the economic outlook improves, retail banks are using IT to grow revenue. Across the senior IT executive respondents in Ovum’s ICT Enterprise Insights survey, 43% highlighted supporting revenue growth as one of the top three strategic priorities for 2015. Over the past years, many banks have neglected the back office to focus on creating a strong consumer-facing platform, therefore improving the efficiency of internal business processes is a core focus for 38% of banks. This streamlining offers cost reduction opportunities, as well as enhanced product conversion and cross-sale rates.
Regionally, North America and North Asia are tightly focused on the consumer, while this is less of a priority in Western Europe. Banks in the US and Canada cited customer origination and customer experience as their two priorities. In North Asia, 58% of banks hold streamlining customer application and management process as a pressing issue. Reflecting the less positive economic outlook in Western Europe, the leading IT priority for banks in the region is simply to support revenue growth.
“The need to grow topline revenue through sales and customer conversion rates is driving investment into digital channels,” says Kieran Hines, Practice Lead, Financial Services Technology, Ovum. “Due to this, the areas that will see the greatest spending in 2015 are mobile and online banking, with 52% and 51% of banks respectively seeing their budgets grow. Product development will see the largest magnitude of budget increase, with over 17% of banks expecting investment to increase by more than 6%.”
IT investment in bank branches will see a large amount of regional difference. Globally, this is the lowest investment priority with 23% of banks seeing budget reductions in 2015. Still, 52% of banks in North Asia and 48% of banks in North America plan to increase spending on bank branch IT. In contrast, in Western Europe and Latin America, IT branch investment will be decreased by 32% and 38% of banks respectively.
A major focus of digital channel investment is enhancing the customer experience and providing greater functionality. Enabling greater customisation in digital channels is a top investment priority for 21% of banks, but enhancing platform functionality is the leading objective for digital channel investment. This includes the ability to offer statement searches or to set-up payments and 53% of banks have indicated this is an investment priority.
Kieran Hines, Ovum, concludes: “There is a wide trend of consumerisation in the industry and retail banking is no exception. Users now expect and demand the same kind of rich, interactive experience they receive from the retail, media and entertainment industries in their banking platform.”