Banks face jump in technology spending but branch costs to fall

City A.M. Reporter
BANKS that have patched up their information technology (IT) systems too often in recent years face big increases in spending to modernise their operations for the digital age.

But digital innovation should help offset the outlays by cutting the costs of new branches, which are likely to be 25 per cent smaller and have a fifth fewer staff, according to a report from Deutsche Bank.

IT costs are predicted to rise by about 10 per cent over the next 10 years, broadly offset by a possible five per cent fall in branch costs.

“We expect a material increase in IT spend by banks over the next 10 years. Core systems are generally old and rely on too many applications patched too many times to cope with rising transaction volumes, regulatory change and digital channel changes in particular,” Deutsche analysts Jason Napier and David Lock said in a note yesterday.

The Deutsche analysts said there is much still to do, but those who move early can take advantage of higher volumes.