Banks and fintech companies face new challenges as open banking and advances in artificial intelligence require new thinking about how to spend IT budgets.
As banks become a 24/7 online business, it is important to understand the technology trends shaping the sector. How do banks adapt to new technologies and what influences their decisions?
Given budget constraints and cost-effectiveness, how much of banks’ spending is dedicated to technology adoption? Infosys Knowledge Institute Research for First Edition Infosys Bank Information Technology Index identified three key trends affecting banks:
- Regulatory compliance, cybersecurity, open banking and cloud computing are top IT imperatives for banks. Despite the emergence of AI as a disruptive technology, banks are still experimenting and have yet to make significant strides in this area.
- Banks are planning to increase technology hiring, with more than half of banks surveyed planning to increase technology hiring by 5% to 10% in the next quarter.
- Despite dedicated efforts, banks continue to struggle to achieve their technology adoption goals.
With increased demand for digital services characterized by personalization, automation and seamless omnichannel integration, banks continue to focus on ecosystem integration and are investing heavily in open banking and APIs.
Our research found that North American banks are leading the way, spending 20% of their technology budget on open banking, with banks in Europe planning to allocate 17% of their technology budget and banks in Asia Pacific planning to spend 15% of their technology budget . technology budgets for open banking.
However, AI is driving the biggest transformation of industries around the world. For banks, rapid adoption of AI is no longer an option, but an obligation. While giants like JPMorgan believe that artificial intelligence will bring business value of $1.5 billion, our research found that AI spending still appears to be only a small portion of the budget. Despite the relatively lower costs, another study found that the financial services sector creates value through generative AI in Australia, New Zealand and Asia Pacificand financial services businesses in Europe And in North America similarly develop use cases that create business value.
“Growing technology needs have created high demand for technology experts. Banks around the world plan to increase the number of in-house technical specialists by 5-10% in the next quarter, with banks in the Asia-Pacific region growing the fastest at 8%, followed by North America at 3.5% and Europe at 2. 9%. »
However, finding the right skills remains a major challenge. Recruiters note that AI experts are the hardest to find. To address this issue, banks are reskilling and reskilling their workforce, and introducing initiatives such as pay transparency and role equality to retain top talent.
Banks face numerous challenges when implementing technology. Budgets are constantly being cut and slow economic growth is looming. However, it is extremely important not to cut costs on technology: Gartner research shows that companies that cut technology budgets during the 2008 financial crisis struggled to keep up with their competitors.
To sum it up, while cloud technology plays a key role in modernizing banking systems and open banking is here to stay, regulatory compliance and cybersecurity remain critical challenges for banks. As data accumulates, the Infosys Bank Tech Index aims to offer a dynamic view of emerging trends to help senior bank leaders make informed decisions regarding technology adoption.
about the author
Punit Modi is the executive sponsor of the Global Commercial Banking COE and partners with CEOs on many industry transformations. He helps clients navigate the world of fintech, big tech and ecosystem banking. Puneet is also a strong advocate of new technologies and has led the adoption of digital technologies, cloud technologies and now artificial intelligence in the financial services industry.
