In the continuously negative news flow that has surrounded the banking industry in the last few months, technology hasn’t really been the main focus of attention. However, there is little doubt that IT spending in European banks will suffer in the coming months, as confirmed by a recent report by research firm Celent.

It predicts that European financial institutions will tighten their belts and delay most non-imperative investments, with their overall IT spending expected to fall drastically by 5.8% in 2009 to US$58 billion.

“While this strategy will dramatically impact the level of IT spending in 2009, it will not be sustainable in the long run, and we expect IT spending to increase significantly after 2010,” the report adds. That will of course depend on how much more bad news is on the way.

However, the one beneficiary of all the current mayhem may well be the retail side of European banking groups. As mentioned in a previous post, retail activities suffered less than corporate and investment banking last year and saved the bottom line of a few institutions, which could mean that what little money banks are prepared to invest in new technology, they might spend on the retail side of the business.

“Retail banking is the sole business line that will experience a slight increase in IT spending to reach US$23.1 billion in 2009,” from $22.6 billion last year, Celent says, as “the current market conditions have strengthened the role of the retail banking business as a stable source of revenue.” For 2010, the firm expects retail banking IT spending to reach US$24 billion.

However, it appears cutting-edge innovation isn’t really on the agenda. The continuation of existing projects to comply with regulatory obligations like Sepa, as well as initiatives aiming to improve the efficiency in the processing of retail operations should remain at the top of the list of priorities for European institutions, Celent says. No mention of specifically customer-oriented innovation, however. The fun stuff will have to wait for better days…

Filed under: Credit Crunch, Retail Banking, Suppliers, Technology