Worldwide banking and securities IT spending is set to decline 4.7% to $514 billion in 2020 before a 2021 rebound, according to Gartner.
Spending on devices such as PCs and mobile devices will see the largest decline, falling 12.1%, followed by data center systems. However, despite current restrictions, new sources of revenue will be critical to extended recovery.
The industry's initial response was dominated by operational actions to enable a remote workforce, which resulted in 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 technology spending in four key areas.
This was 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.
However, following strong growth of 5% in 2019, the impact of COVID-19 will see spending on IT services decline in 2020, according to Gartner.
Contract size, contract terms and deal type will be severely impacted, as large transformation projects are postponed, cut back or canceled. 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.
In fact, COVID-19 has presented an opportunity for banks to increase their digital engagement and broaden the services offered, Gartner states. Banks only currently derive 27% of revenue on average from externally delivered digital services, according to the 2020 Gartner CIO Survey.
As a result, Gartner forecasts technology spending in the banking and securities industry to recover in 2021, growing 6.6% globally.
Gartner senior director analyst Jeff Casey says, “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.
“These firms continue to respond to the emerging needs of customers amid ongoing economic closure and dwindling government support.
Casey says, “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.
“They're also focused on redesigning organisation structures and workflows and reprioritising modernisation initiatives. This will be short-lived as banks initially react and respond to COVID-19 disruption.
“IT services spending will begin to rebound as banks accelerate reprioritised modernisation initiatives in 2021.