Banks and other financial institutions will need to spend hundreds of billions of pounds on their IT systems over the next few years in order to be able to compete in the digital world, according AXA Investment Management.

With the banks alone forecast to spend $296.5 billion globally by 2021 according to a report from Celent, Vincent Vinatier, manager of the AXA WF Framlington FinTech fund, stated that changing consumer behaviour in the digital era has already seen a sharp jump in investment in technology by financials as they seek to stay ahead of competition from peers and new fintech businesses.

“The size of the issue is mind-boggling in terms of cost,” says Vinatier. “So many banks and other financials still have clunky systems, and if there has been any acquisitions of other businesses in the past then there could be two or three old systems which need upgrading and merging.”

He added: “It is extremely complex and we are seeing more of these projects overrun and cost businesses more.”

As well as upgrading legacy systems, banks and their peers also have to contend with a move to the cloud and constant investment in cyber-security, Vinatier said, citing organic growth rates in white-labelled digital banking solutions of 10 to 20 per cent per year.

There are also increasing demands being put on banks by existing customers who are being offered digital-only solutions from challenger banks.

“Digital challenger banks are likely to continue their upward growth trajectory, with such firms simplifying banking for today’s consumers and being nimble enough to adapt to new technology,” Vinatier commented.

“For established retail banks, investing more in their own technology will be crucial in order to overcome legacy IT issues and deliver digitally-friendly solutions for their customers, to keep pace with the digital transformation and these digital disruptors,” he concluded.

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