As chief information officers plot their budgets for 2017, they have a lot to consider.
Does compliance software need to be improved? Probably.
Does cybersecurity need to be beefed up? Most likely.
Could their mobile apps do more? Perhaps.
Are they going to need a bigger budget? Oh yeah.
In July, SourceMedia Research surveyed 304 chief information officers from banks, credit unions and other financial institutions with assets ranging from less than $100 million to more than $10 billion, and nearly 70% said they plan to spend more on technology in 2017.
A mere — but perhaps still surprising — 7% said their spending is likely to fall. The balance was roughly split between those who expect it to stay the same and those who said they did not know.
Among those forecasting an increase, 68% said it will be between 1% and 10%. Of course, that means nearly a third are expecting their budget to expand by even more.
For context, respondents' median budget in 2016 was $832,500. However, the mean budget, given the wide range in assets of financial institutions surveyed, was $110.3 million.
When asked where they will spend more in 2017, about half of the respondents picked compliance (55%), security (53%) and mobile device management software (47%) from a list of options; multiple answers were encouraged.
Another 34% said they plan to increase spending on lending platforms. That is likely a testament to the impact of marketplace lending — banks realize that consumer and commercial borrowers have come to expect a faster and easier experience. Fintech has also taken notice, with such solutions being one of the hottest developments in the industry.
Speaking of fintech, the respondents had decidedly mixed feelings about it. In a question where multiple selections were encouraged, 31% said they compete with fintech in core businesses, while 27% said they compete with fintech in noncore segments. Still, 26% say they partner with fintech to reach new customers, and 27% said they partner with fintech to lower their operating costs. About 11% said they incubate startups.
About 40% said they plan to spend more on data analytics. That is perhaps a smart move, particularly for the smaller banks in the bunch, as larger organizations are pouring resources into finding the best ways to use their data — ranging from compliance solutions that pick up abnormalities to marketing solutions that help big banks show customers they know them, which encroaches on community banks' main competitive edge.
For institutions with assets of more than $10 billion, the percentage of those expecting to spend more on mobile technology shot up to 60%. If spending is any indication of priorities, big banks are putting a premium on building their mobile capabilities. Increasingly, customers are judging the quality of banks based on its digital offerings. In fact, earlier this year the market research firm J.D. Power and Associates said the six largest U.S. institutions scored higher than their smaller rivals in overall customer satisfaction for the first time since the firm began measuring bank satisfaction in 2006. The big banks' digital capabilities are largely viewed as the impetus for the shift.
That's not to say banks are ignoring branch technology. Only 11.5% of respondents said "we are investing less in branch technology"; it was the least-selected answer to a question about how customers' migration to digital channels was shaping branch-related technology spending. By contrast, 40% said they were increasing their investment in automated, self-service technology.