US banks to spend $16.6 billion on digital transformation

US banks to spend $16.6 billion on digital transformation

A report has been released by technology consultancy IDC Financial Insights, called “The Cost of Digital Transformation in US Banking: The Critical Technology Investments in 2015 and Beyond”. The vast amount that is being invested in moving from manual to digital is highlighted in this report and it provides an overview of where US banking funding is headed.

In order to transform and modernise their business, it was found that retail banks will spend nearly $16.6 billion this year on digital technology such as hardware, software and services, alongside internal IT staff to manage this new infrastructure.

Investment in digital transformation is expected to grow by 10.4% in the next four years, according to the IDC report, compared to the 3.9% overall IT investment by US banks.

Due to regulatory pressure and an increase in cyber-attacks on banking security systems, digital transformation costs have become expensive, but this report attempts to analyse those investments into systems that have been beneficial for banking professionals.

IDC reveal that regardless of the size of bank, software spend is a large part of digital transformation and is responsible for high growth in financial institutions. On the other hand, the IT services spend is smaller, but not substantially, as it is predicted to increase by 8.5% each year.

The report also says that US banks will dedicate one third of the IT budget to achieving digital transformation within the next five years.

With budget season imminent for banking institutions, funding the move from manual to digital will be difficult. However, with the support of the insights outlined in this report, IDC can guide treasurers and provide information on what is the best way to invest and transform the business at the same time.