Despite Current Restrictions, New Sources of Revenue will be Critical to Extended Recovery, According to Gartner, Inc.
Worldwide IT spending in the banking and securities sector is expected to decline nearly 4.7% to $514 billion in 2020, according to Gartner, Inc. 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.
During the early stages of the pandemic, banks focused on technology spending in four key areas:
· Operations: to ensure continued access to basic services;
· Supply chain: to address emerging supplier and customer needs;
· Revenue: to ensure continued viability of the business; and
· Workforce: to support employees and remote working amongst disruption.
Gartner forecasts technology spending in the banking and securities industry to recover in 2021, growing 6.6% globally (see Table 1).
“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 Mr. Casey. “They’re also focused on redesigning organization structures and workflows and reprioritizing modernization initiatives.”
Table 1. Worldwide Banking & Securities IT Spending Forecast (Millions of U.S. Dollars)
|2019 Spending||2019 Growth (%)||2020 Spending||2020 Growth (%)||2021 Spending||2021 Growth (%)|
|Data Center Systems||31,218||1.0||27,757||-11.1||30,189||8.8|
Source: Gartner (August 2020)
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,” Mr. 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.