Retail banks in the United States will spend $20.2 billion on hardware, software, services, and internal IT staff to develop and implement digital transformation (DX) initiatives in 2017, growing at an average compound annual growth rate (CAGR) of 22.5% into 2020. a recent study from IDC Financial Insights finds.
This compares with growth of 4.8% in overall IT spend for U.S. banks. The forecast highlights spending by US–based banks across four categories of DX technology: hardware, software, IT services, and internal IT, as defined in IDC Financial Insights Worldwide Banking Taxonomy, 2017.
According to Jerry Silva, research director, Global Retail Banking, IDC Financial Insights, "There are very few banks in the United States that aren't investing in transformational technologies, and fewer still that haven't at least developed a digital transformation strategy. And the largest institutions are allocating more than 40% of their IT budgets to digital transformation."
As banks in the United States endeavor to stay relevant in the financial lives of their consumer, business, and corporate customers, the institutions are dedicating more and more of their scarce resources to initiatives that promise to transform the business. In addition:
- 25.7% of the banks' IT budget will be spent on DX initiatives in 2017, growing to over 40% by 2020
- 82% of the DX spend is taking place in the middle and back office and in commercial and payments areas where investments in infrastructure, security, risk management, and data initiatives are higher than in front-office, customer-facing spending
- Because of the pressures coming from regulatory compliance, increased need to manage risk, and constant attacks on the banks' security systems, discretionary spending for important line-of-business projects that can accomplish DX continues to be at a premium
Disruptive technologies including cognitive, robotic process automation, and blockchain will be in use at 50% of banks worldwide by 2020, accelerating digital transformation by 30%, the report found.