IT spending by Aussie banking and finance to hit $27.3b

IT spending by Australian banking and investment services is expected to hit AU$27.3 billion in 2023, up 7.3 per cent from 2022, according to Gartner.

Software expenditure will see the largest growth at 14 per cent to $6.6 billion in 2023.

Spending on IT services is expected to see 5.8 per cent growth to $12.4 billion, with growth slowing down compared to that of 2022; however it continues to remain the highest spending category.

Gartner director analyst Debbie Buckland said economic uncertainty is leading organisations to break down long-term contracts into multiple shorter projects.

"They’re also reluctant to sign new contracts, commit to long-term initiatives or take on new technology partners, which is driving an increase in the use of IT consulting services," Buckland said.

Australian banks are also expected to spend more on data centre systems, with a predicted 9.7 per cent growth in Australia in 2023 to $1.3 billion.

This is a higher growth rate than the global forecast of 5.7 per cent.

However, while global spending on devices is expected to decrease by 2.1 per cent, Gartner expects a 3.8 per cent growth in the same area within Australia to $1.5 billion.

“With interest rates continuing to rise and a slowing economy, Australian banks are shifting IT spending away from traditional areas of regulatory compliance change and legacy infrastructure support, back to the mortgage customer," Gartner’s managing executive partner Nicholle Lindner said.

“Strategic investments in new platforms, partnering with fintechs and other digital innovators, as well as legacy modernisation, will become increasingly essential for banks this year as they compete to win market share from each other in this challenging market, particularly from a home loan perspective,” Lindner added.

“Australian banks are looking toward investment in digital platforms to drive efficiency, as well as digital channels and customer engagement technology to deepen relationships and assist customers through challenging economic times," Gartner senior director analyst Jeff Casey said.

“Given the growing prevalence of fraud and scams in the market, investments in data and analytic capabilities like AI and machine learning, real-time monitoring and alerts are particularly relevant to help protect customers and avoid losses," Casey said.

However, compared to global banking and investment services IT spending, the growth in Australia sits below the 8.1 per cent predicted growth globally, at 7.3 per cent.

Due to the technology skills shortage, Gartner expects internal services to increase by 3.8 per cent to $2.5 billion to support the increased costs of hiring and retaining talent.

“Even after the recent widespread redundancies at many of the technology giants, banks are no longer seen automatically by top talent as the most desirable, rewarding or stimulating destinations,” Gartner vice president analyst Pete Redshaw said.

“More innovative solutions are needed, such as dropping the requirement for university education and adding benefits such as lifetime retraining, hybrid teams, agile methods and fintech partnerships.”