US consumer banks with less than $20bn in assets dedicate 49% of their IT spending on core banking systems to traditional deposit systems. These are mostly legacy application systems that include basic functions like teller support, statements and funds transfer. Larger banks have been directing most of their technology investments to specialised consumer finance products, like cards, loans and mortgages.
TowerGroup estimates that consumer banks are spending $45.9bn globally on core banking systems in 2004 and that this will grow to $49.2bn in 2006. What adds more value, a deposit system or a product system? The answer depends on the business strategy. And banking business is thriving on a federation of specialised products and utilities. To be effective, these product-oriented technologies must align with an holistic enterprise systems architecture that ensures a consistent customer experience and streamlines regulatory compliance.
Guillermo Kopp is director, financial services strategies & IT investments and emerging technology solutions practices at TowerGroup
