Retail banks in the U.S. will spend nearly $16.6 billion to implement digital transformation initiatives in 2015, said IDC.
IDC said the spending — on hardware, software, services, and internal IT staff — on digital will grow at a compound annual growth rate (CAGR) of 10.4 percent into 2019. This compares to a growth rate of 3.9 percent for an overall IT spending by U.S. banks.
Software and internal IT will see more growth in IT investment to boost digital transformation. While internal IT is a large part of digital transformation, software spend is shared by all institutions.
Growth in spending on IT services for digital transformation will grow at 8.5 percent year over year in 2016. Hardware is keeping pace with total IT spending growth.
The growth of spending on digital transformation is outpacing aggregate IT spending by more than 2.5 to 1. In five years, one third of the IT budget at U.S. banks will be dedicated to achieving digital transformation.
Spending on consumer initiatives (including small business) and infrastructure improvements will continue to lead the way. Payments will experience a healthy proportion of spend in transformation as well.
Banks are using 80 percent of the IT budget for mandatory improvements in compliance, risk, security, and operations.
U.S.-based banks and credit unions use 24 percent of the total IT budget for digital transformation. Business executives are buying consumer-facing solutions to improve customer engagement, while the CIO and IT groups try to transform the bank’s infrastructure from the inside out.