Banking to Reinvest in Technology in ’04

According to a new study by Deloitte & Touche, the banking industry is expected to under go major changes in the next few years and will begin to revive old technology projects and implement new ones in order to grow, provide better customer service and comply with government regulations.

“I won’t say they’re going to go big scale,” said Paul Wirth, managing partner of Deloitte’s US Banking practice and a member of the report’s editorial board. “I don’t think we’re going to see a drastic wrap up in big projects but I think we’re going to see very practical, client focused things that are going to generate immediate value that they can point to, is what they are going to go after.”

Deloitte’s “Global Banking Industry Outlook”, released Thursday, found the industry is very concerned about customer dissatisfaction over the past few years and will being using technology to bring about better customer service, said Wirth. Solutions that can provide a single customer view enabling better customers service, for example, may do very well in this environment. Also, applications that help the industry automate back office functions such as check clearing and mortgage loan processing, will be popular as well.

Government regulations will also drive the industry, he said. Sarbanes-Oxley compliance, the Patriot Act, Basel II and anti-money laundering legislation are all high on the industry’s collective radar. Back-end functionality applications that help banks gather, track and process data will do well here.

“I think regulation gives them one added feature of saying ‘We’ve got to do a lot of these things because it is being forced upon us’ but its not the single driver itself,” he said.

Another driver is profitability. Over the past few years the industry has focused its technology dollars on maintenance issues, but, now that the economy is turning around purse strings are starting to loosen and this means more money directed at technologies that help banks achieve greater profitability.

Because of this, off-shoring of back-end operations centers to lower-cost locations such as India or China could become a popular trend, said Wirth.

“So, I think they’re now taking a step back and saying its probably time that we … get back to basics saying ‘How are we going to use technology to its fullest to help us from an efficiency standpoint, a customer standpoint and the like?’,” said Wirth.