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AP financial sector more resilient than global peers – IDC forecast

Veronica C. Silva | Dec. 6, 2011
IDC expects growth instead of bank closures.

Despite doomsday scenarios being painted of the financial services sector globally, the Asia Pacific region is once again expected to weather the storm.

The 2012 forecast of research and consultancy firm IDC paints a better-than-expected picture for the sector, with growth pegged at 5.8 percent, the same as the growth expected for 2010-2011.

In the IDC Financial Insights report titled 'Asia/Pacific Banking Top 10 Predictions: Shattering the Myths of 2012', IDC said it is not expecting the industry to shrink. On the contrary, IDC's top prediction is that the number of banks will grow further.

"There are several mistaken generalisations about what will happen in Asia Pacific banking in 2012. We correct the notion that many institutions will either fold up or exit the industry, leaving fewer players across the sub-regions, including Asia Pacific. Instead, we expect that even more institutions will compete in our region and drive yet more ferocious market competition, even in already mature banking segments," said Michael Araneta, research director, IDC Financial Insights Asia/Pacific.

But with the growth in the number of banks, IT investment in the banking sector is expected to dip. "IT spending growth will decelerate as banks drive down cost ratios to unprecedented levels," is IDC's second top prediction for the sector in the region.

IT budgets

Banks' external budget for IT is expected to expand by an average of seven percent in 2012 compared to 2011. This is not typical of the industry, said IDC, as the banks maintain a wait-and-see attitude.

Still, there are some bright spots for IT spending.

"There are also some industry segments and functional IT areas that will see robust IT spending growth. In general, we see healthy IT spending from banks in large, geographically dispersed markets, as well as mid-sized banks that are attempting to be tier 1 players," said Araneta.

Other investments are expected in new core banking systems, and their follow-on projects in channels, business process management, and product management systems, said IDC.

IDC's other predictions are:

3. Spending on risk management will account for 15 percent of IT budgets.

4. Longer core banking project implementations will become more acceptable. 

5. Asia Pacific banks won't be hit hard by Basel III-related provisions, but may still be adversely affected by compliance issues.   

6. The ASEAN Economic Community (AEC) makes banks think "super-regional".

7. Banks will become more willing to allocate considerable IT dollars to innovation programmes.

8. "Big Data" will find its first successful use cases in risk management and fraud management.

9. The benefits of private and hybrid clouds will gradually relax anti-cloud computing positions. 

10. Speed and real-time capabilities are the competitive differentiators to watch out for in 2012.


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