Bankers as Buyers is an annual report prepared by the William Mills Agency, along with the assistance of analysts and bankers nationwide, “to help financial institutions and those companies serving them validate their strategic IT direction, compare investments in technology by type or direct further research.”
Below are excerpts of the 2012 report concerning compliance and regulatory spending. If you are interested in the full report, it is available online at http://www.williammills.com/index.php/Resources/Financial-Industry-Resources.html.
IDC Financial Insights expects North American financial institution technology spending to increase by just under two percent in 2012, to about $53 billion, representing what in the past might have been considered a poor year but the growth rate is now considered as a new normal.
Mobile banking will have much of the focus for the technology spending, though it will likely fall behind in terms of absolute dollars spent on compliance/regulatory technologies and security/fraud prevention. IDC predicts that financial institutions will also attempt to eke out more efficiency by focusing on technologies and processes that help reduce costs.
An Aite surveys found that 42 percent of high performing financial institutions and 20 percent of other financial institutions planned on increasing spending on compliance technology during the next 24 months.
Compliance Still Dominates Tech Spending
Compliance technology spending continues to be significant due to regulators’ demand for better analytics and more frequent reporting, according to Jeanne Capachin, IDC Financial Insights. Capachin adds that some of the compliance requirements for Basel III and for Dodd-Frank are “sucking the life out of innovation for financial institutions.”
Compliance spending is one of the first areas of the budget that financial institutions address, particularly after any industry slowdowns, because this area where there is no questioning the necessity and budgetary approvals are relatively easy to obtain, said Tom Hinkel, director of compliance for Safe Systems. “Increased reporting is an area they will have to deal with for several years.”
Beyond simply “having to do it” due to regulatory concerns, compliance systems are important to protect the financial institution from reputation risk if something were to go awry, Hinkel adds.
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