50% banks will lack innovation programs, budget by `13: Gartner

Last Updated: Tuesday, January 5, 2010 - 21:10

Mumbai: Fifty per cent banks in the world will lack a formal innovation programme and budget by 2013, severely restricting their growth as pressure from governments and regulators make them risk-averse and inflexible, a study by IT research firm Gartner Inc says.

"By 2013, 50 per cent of banks will still lack a formal innovation programme and budget, severely restricting growth potential," Gartner said while making IT predictions for banking and investment services.

The US-based IT research and advisory firm said that non-banking competitors like retailers, online companies and telecom operators are making inroads into the banking industry, thereby leading the way with customer-oriented service improvements, which customers will seek as economies of access improve.

Meanwhile, banks will hike their fees to help offset this customer attrition.

"Pressure from governments, regulators and consumers is making some banks risk-averse and creating a culture of introversion and inflexibility," the US-based IT advisory firm`s Principal Research Analyst, Richard De Lotto, said.

Gartner suggested that banking and investment services firms should focus on innovation initiatives to improve services as opposed to pure product development.

Banks also need to ensure that personalisation remains a critical component in innovation initiatives.

Gartner said that as part of innovation, banks could recapitalise by servicing consumers who need loans to cover periods of unemployment or catering to businesses in dire need of credit lines, which will see them through to recovery.

"Growth in peer-to-peer (P2P) lending will be driven by investors seeking higher returns and borrowers shunning (or being shunned by) banks. By 2013, P2P lending will soar at least 66 per cent to USD 5 billion of outstanding loans," I said.

Financial services providers need to investigate how to partner and collaborate in adding P2P to their existing offerings rather than building their own P2P lending networks, the research firm said.

It also predicted that by 2013, seventy-five per cent banks will lack the means to systematically identify and exploit potentially disruptive technologies.

Meanwhile, 90 per cent bank services hub (payment, lending and treasury management) initiatives that are planned or are underway will need to be re-architected on a global basis as the next 5-10 years will see significant progress towards more-holistic approaches to services hub designs.

"Banking and investment services providers need to make a critical shift to a more outward-facing set of objectives for IT that are risk-aware, but still innovative and bold," De Lotto said.

Gartner said that as part of innovation, banks could recapitalise by servicing consumers who need loans to cover periods of unemployment or catering to businesses in dire need of credit lines, which will see them through to recovery.

"Growth in peer-to-peer (P2P) lending will be driven by investors seeking higher returns and borrowers shunning (or being shunned by) banks. By 2013, P2P lending will soar at least 66 per cent to USD 5 billion of outstanding loans," it said.

Financial services providers need to investigate how to partner and collaborate in adding P2P to their existing offerings rather than building their own P2P lending networks, the research firm said.

It also predicted that by 2013, seventy-five per cent banks will lack the means to systematically identify and exploit potentially disruptive technologies.

Meanwhile, 90 per cent bank services hub (payment, lending and treasury management) initiatives that are planned or are underway will need to be re-architected on a global basis as the next 5-10 years will see significant progress towards more-holistic approaches to services hub designs.

"Banking and investment services providers need to make a critical shift to a more outward-facing set of objectives for IT that are risk-aware, but still innovative and bold," De Lotto said.

PTI



First Published: Tuesday, January 5, 2010 - 21:10

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