Financial services companies increased their spending on technology by 4% to 6% last year, according to Ernst & Young's sixth annual survey on the subject.
More important than the dollars spent, Ernst & Young officials said, is what is actually being funded.
Banks increasingly are undertaking projects such as Internet banking and data warehousing that only a few years ago were receiving virtually no support.
"The traditional model of banking is dying as we see more banks becoming diversified financial services companies," said Philip Lawrence, partner in Ernst & Young's financial services consulting practice and coordinator of the survey.
The firm surveyed 131 companies in 17 countries. Between them, the responding U.S. banks hold about 37% of the combined assets of the nation's top 100.
For the first time, Ernst & Young polled insurance companies, mutual fund companies, and brokerages in addition to banks.
The company cited the increasing competition and overlap among the specialties. For example, Federal Reserve statistics showed that insurance companies' and brokerages' share of the asset management market grew to 66% in 1996 from 37% in 1976, while commercial banks' share fell to 13% from 25%.
When asked to name innovators in financial technology, the survey's respondents cited companies like Citicorp, Fidelity Investments, Charles Schwab & Co., and Wells Fargo & Co.
"These firms were chosen because they are looked at as innovators in connecting with their customers," said Mr. Lawrence.
The study showed that the Internet is expected to be a common avenue for financial transactions in coming years. Of U.S. respondents, 57% expected to be processing Internet-based transactions this year, and about 87% of the rest plan to do so by 1999.
About 77% of all respondents currently operate sites on the World Wide Web.
Also, banks expect a 34% increase in automated teller machine transactions and a fourfold increase in home banking transactions by 1999.
In the area of data warehousing, respondents said front-office applications are driving implementations. About 60% use the huge information repositories in their risk and product management areas. About 80% use the warehouses for decision support.
Spending on the so-called year-2000 problem is set to peak this year, the survey indicated-although Mr. Lawrence wondered whether that reflected what companies hoped for or what they actually would do.
Thirty-six percent of respondents indicated that the most important technology investment in 1999 will be in personal-computer banking and the Internet.
Further, two of the top priorities in retail branches were cross-selling and relationship management.
Mr. Lawrence noted that the survey showed some significant differences between the priorities of U.S. and foreign banks.
"Canadians have a greater belief in the role of branch banking than Americans," he said.
He concluded that banks in general were driven to offer their services through the widest variety of channels.
"The competitive battle is shifting to the idea of capturing 'share of the wallet' rather than pushing products," said Mr. Lawrence.
"The firms that will serve well will not be the old financial supermarkets but the ones with the infrastructure for lots of virtual transactions."
