U.S. retail banks plan to spend more than $20 billion on digital transformation initiatives this year, according to a new report from IDC Financial Insights. There are very few banks in the United States that aren't investing in transformational technologies, IDC found.
- In all, one-quarter of the banks' IT budget will be spent on digital transformation initiatives in 2017, growing to more than 40% by 2020.
- Over 80% of the digital transformation spend is taking place in the middle and back office and in commercial and payments areas. In those areas, investments in infrastructure, security, risk management and data initiatives are higher than in front-office and customer-facing spending, according to IDC.
Banks are well known for their legacy technology, with Cobol machines permeating their layers of back-end infrastructure tech.
But given today’s threat environment, that dated technology can put banks at risk. More banks are reporting serious attempted cyber breaches and many of those attacks are successfully gleaning information, according to a recent report from Accenture. Such incidents don’t come cheap, either. Cybersecurity incidents involving online banking services cost banks an average of nearly $1.8 million each, according to a recent Kaspersky Lab report.
At the same time, increased competition and slimmer margins mean banks need new approaches for attracting and retaining customers. Digital transformation can help banks with both objectives, which is helping ot spark the investment.