Banks shift focus to IT, may spend 13% more

Banks and securities companies will increase their spending on IT products and services to Rs 47,700 crore in 2014

Banks and securities companies will increase their spending on IT products and services by 12.7 per cent to Rs 47,700 crore in 2014, says a report.

"Domestic banking and securities companies will spend Rs 47,700 crore on IT products and services in 2014, an increase of 12.7 per cent over 2013 revenue of Rs 42,300 crore," IT research and advisory firm Gartner said in a report.

The estimate includes spending by financial institutions on internal IT services (including personnel), IT services, software, data centre technologies, devices and telecom services.

Gartner research director Vittorio D'Orazio said banks will continue to focus on expanding their branch network. He expects about 2,000 new branches in the country by the end of this year.

"This strategy, triggered by the need for expansion and for getting market share, is also underpinned by the new bank licenses released by the RBI," he said.

The modernisation of the back offices, as well as the need to be compliant with international regulations, and increased challenges from new more demanding customers are other trends Gartner sees in the markets.

IT services will be the largest segment in overall spending in the banking and securities market at Rs 14,900 crore in 2014, due to the continuous focus on the financial services sector by IT services providers.

The IT services segment is forecast to increase at the third-fastest growth rate at 15.3 per cent compared to 2013.

Internal services, which includes IT personnel, is projected to be the fastest growing segment at 21.6 per cent in 2014, largely due to the expansion strategies of banks across the country, especially in rural areas, which require more personnel on the field.

Software is expected to be the second-fastest growing segment, with 19.2 per cent growth in 2014, the report said.

In the software segment, vertical specific software is the fastest sub-segment due to core banking system replacements and other back-office consolidation which will steer banks from internally developed software to external packages.