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Straight Talk Technology

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One of the big shifts in banking over the last few years has been the switch in the dominant business drivers behind IT investment from compliance and efficiency to revenue growth and enhancing the customer experience.

For a number of years now, Ovum's ICT Enterprise Insights study has asked retail banks to identify their top three drivers for IT investment, and historically the IT strategy in banking has been shown to be driven by an array of drivers. Looking back at the outlook at the start of last year, revenue growth was a top-three driver for a third of institutions, but this was balanced by a third of institutions also looking to reduce operating costs. Similarly, while just over a third had IT investment driven by the desire to enhance the customer experience, just under a third had IT spend steered by a desire to streamline business processes. In the same way, just over a quarter of institutions were driven by the need to comply with regulatory requirements, while over a quarter were also looking to launch or enhance digital services.

Looking into 2019, while all drivers remain significant, there is now much stronger polarization in the business drivers behind technology investment. Supporting revenue growth is now the dominant driver, ranking as a top-three driver for nearly half of the banking sector. In contrast, supporting operating-costs reduction is only significant for just over a quarter of banks. Indeed, using technology to reduce staffing levels (e.g., through automation) has dropped from a quarter of banks last year just 7.5% this year. Likewise, enhancing customer experience has become a much stronger investment influencer (an increase of 10%), with the proportion focused on streamlining business processes flat compared to last year.

Alongside this, one of the big changes has been a mounting importance of the need for speed in terms of time to market for new products and services. Together with revenue growth, this was the driver most identified as being the top business priority for banks in 2019. Interestingly, while speed to market has become more important, enabling greater product flexibility and innovation has become less so. It's not that innovation is no longer a strategic imperative, but that actually getting new products or services to market provides the higher value that major innovation takes a long time to deliver.

This is a significant mentality shift, with banks moving away from their traditional waterfall-based approach to delivery, where major new platforms or services would be released every two, three, or even five years. Instead they are moving towards an agile, continuous development approach (particularly for digital channels) where minor enhancements or new services are regularly delivered and new ideas are rapidly piloted and tested on market rather than developed into major services before being launched. Delivering something to market to provide customer value now is more valuable than waiting for a highly refined version delivered in the medium-to-long term.

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