The idea of a separate "IT budget" for banks may soon go the way of the passbook: a relic no longer relevant to the industry.

Technology spending in banking has changed dramatically in the past five years or so. A bank's IT budget used to be dedicated largely to maintaining infrastructure to keep the business running. Now, with the industry pursuing digital transformation and growth in mobile channels, areas of the bank that typically weren't involved in tech spending in years past are now spending on technology initiatives managed outside the IT department.

As a result, bankers should be thinking about tech spend as it pertains to all areas of the bank, as opposed to a solitary discipline, some say.

"The rise of digital is really changing what it means to be a bank," said Stephen Greer, an analyst with Celent.

Banks face a conundrum when it comes to tech spending, he said; they still have to spend more each year to maintain infrastructure and run compliance and security technology while also investing in the digital services necessary to remain competitive. At the same time, CEOs and boards are always looking at ways to control costs, and if they see simply that the technology budget is rising – without explanation of how those dollars are carved up – it can result in orders to cut tech spending as a whole.

One way to adapt is to move "budget and reporting lines to customer segment or journey owners," as a Forrester report from November put it. The report predicted that "a handful of leaders" would move in this direction in 2017.

At USAA, for example, "the experience owner has an end-to-end view and ownership of the technical capabilities that enable the customer experiences," said Kim Snipes, the chief information officer for the company's banking business. "That business ownership naturally incents a behavior of maximizing the technology investment to cover the continuum of innovation through enhancements to maintenance of existing capabilities."

This approach brings "accountability" to technology spending, Snipes said, and allows bank personnel to "prioritize the various types of investment to bring about the best outcome for the customer and the business."

Greer agreed that this method could help banks allocate tech spending better at a time when technology budgets keep rising.

"Then you can have a better idea of what's being spent on maintenance and running the bank and what's being spent on real innovation and new initiatives," he said.

Banks that still look at IT budgets as a stand-alone entity run the risk of becoming "dinosaurs," Frank Sorrentino, CEO of Englewood, N.J.-based ConnectOne Bank, told American Banker in October.

"It should be baked into all your [internal] budgets," he said.

Even with such a model, banks still need to manage every dollar efficiently, Greer said, and they need to look carefully at what they might cut in other areas to enable more spending on technology.

He said larger banks – which he defined as those with $20 billion in assets and above – have more leeway to cut from other areas to add to technology; they can close branches, eliminate some branch staff functions and cut back-office costs, such as by getting rid of mainframes and instead using hosted cloud storage solutions. But it's the smaller banks that will find it harder to do more with less as they have less to potentially do away with.

"They're generally running leaner operations anyway," Greer said. "They have [fewer] branches and there's not a lot of excess in the back office to be cut."

However, smaller banks do have one advantage in that the money they have to spent on things like cybersecurity and anti-money-laundering technology is far less than the larger banks, since they deal with fewer transactions per day and are not as attractive a target for hackers, said Gilles Gade, CEO of Cross River Bank in Fort Lee, N.J.

"A small community bank in Nebraska is not going to have to spend as much [on these systems] as a JPMorgan Chase," he said.