Banks around the globe will raise their IT and innovation budgets to counter the growing threat from the challenger banks and "branchless" direct banks, according to a Capgemini survey of clients of core tech vendor Temenos.
According to the survey, banks named investment in IT systems and innovation as their top two priorities, with focus on IT systems emerging as the top priority this year from fourth priority last year.
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Nearly 64% of respondents said they anticipate higher spend over the next 12 months. Correspondingly, IT budgets are forecast to rise again in 2016.
The report added that banks see a significant threat coming from banking players not operating in their market presently, such as overseas banks and challenger banks. However, they are most worried about the threat from non-traditional players, especially technology companies, such as Google, which were cited by 27% of the respondents.
Only 26% of respondents cited incumbent banking players as their biggest rivals.
In the face of easing regulatory constraints and rise in digitisation, banks are now also shifting their priorities from implementing new regulations to building up suitable capabilities to retaining their better-informed and less-loyal customers.
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By GlobalDataNearly 14% of the respondents said they are concerned about their ability to recruit top talent as compared to 7% a year ago, while 15% of the respondents said they are concerned about their capacity to capitalise on their data assets and improve profitability.
Also, 89% of the surveyed banks have been found to operate at least one application in the cloud as against over half in 2009.
Regulation and data security are now seen as diminishing challenges to cloud implementation by respondents, with internal factors such as lack of internal expertise seen as bigger hurdles.
In addition, 52% of respondents cited open banking as a business opportunity, while 60% held the view that open banking is necessary to combat the threat from non-traditional competitors.
Temenos chief strategy and marketing officer Ben Robinson said: "This year’s survey shows significant change in banks’ challenges and priorities. As the burden of new regulation diminishes, banks are concentrating on readying themselves for a more digital world, characterised by lower customer loyalty and new, multiform competitors.
"What is encouraging is the extent to which banks are making the right moves, investing in acquiring the right talent, upgrading their distribution channels and replacing their ageing IT infrastructure. Technology modernization, especially in areas like core banking and analytics, is essential to delivering richer and more personalised banking experiences. And only through increasing customer value-add can banks protect themselves against a more competitive environment."
