Many insiders believe the long-term success of financial services firms depends on them becoming technology-driven companies. With the rise of robo-advisors, the inroads made by blockchain and the success of regtech, to name just a few developments, it’s hard to deny the rising dominance of technology in financial services.
If you doubt the scale of change taking place in the financial services industry, check out these numbers. They may change your mind.
Members of the “Big 5” are spending big In 2017, The Bank of Nova Scotia spent C$1 billion on technology – 40% of which went to “change-the-bank” projects versus traditional operating expenses in tech. (Source: Financial Post ) The Royal Bank of Canada spent C$3 billion on tech in 2017 – transformative projects garnered 30% of that spending. (Source: Financial Post )
IT spending in general will hit US$2.7 trillion by 2021 , with banks, manufacturers and telecommunication services providers among the spending leaders. (Source: Channelnomics ) Financial services IT spending was estimated at US$480 billion worldwide in 2016 with a five-year compound annual growth rate of 4.2%. (Source: IDC ) The drive to increase tech spending is partly the result of the expanding investment industry, which is set to grow to approximately US$2.65 trillion by 2020. Financial services, namely banking, insurance, securities and investment services companies, will lead industry spending. (Source: Arnnite )
Insights from the International Data Corporation
Fintech spending more than tripled in 2014, reaching over US$12 billion . (Source: PwC ) Fintech spending in 2017 was estimated to be approximately US$19.9 billion in North America, US$15.3 billion in Europe and US$22.1 billion in Asia. (Source: Statistica )
Focus on fintech
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Is it worth it? Not everyone believes this spending is a smart allocation of assets. PwC has reported that financial institutions could be spending up to twice as much as they need to on IT. (Source: PwC )
The technological change unfolding in the financial services industry is unprecedented – and it represents some incredible challenges and opportunities for everyone who works in this space.