Financial-services companies face unique business challenges that technology can help resolve, including compliance with government and industry regulations and maintaining information security. Of course, their primary concern is customer demand for electronic transactions. And following recent accounting scandals, some of which involved financial companies, accountability rules are stricter than ever.
Financial-services companies -- including banks, brokerages, and insurance firms -- are considered aggressive adopters of new technology. And while they're optimistic about business in 2004, they're cautious when it comes to IT investments. This month's Gap Analysis looks at IT issues in financial services.
Conventional wisdom says a positive business outlook will likely translate into higher spending on technology.
History shows that companies in the financial-services industry aren't afraid to invest in IT and explore emerging technologies aggressively. But during the recent economic slowdown, these companies -- like all others -- became more cautious about technology spending.
That attitude will likely continue. A minority (45%) of the 150 financial-services business-technology executives surveyed in an InformationWeek Research Priorities study said they had a positive outlook, given their companies' IT budget and spending plans for the first three months of the year. Half the executives said their spending outlook was "neutral."
Far more executives are optimistic about business. Just over 60% have a positive outlook on their industry's economic conditions, and about three-quarters feel positive about their company's business prospects based on the first quarter.
Persistent cautiousness about new-technology investments could hinder companies' ability to keep pace with change, a business priority for IT organizations in 2004, according to 83% of the executives. The key to remaining innovative is to prioritize and go forward with investments that promise solid business benefits.
Some CIOs lack a positive outlook on spending because of compliance and other risk-management efforts that have consumed a good portion of their IT budgets, says Vincent Cera, senior VP of information systems and operations at Federal Home Loan Bank of Indianapolis, a provider of loans to retail banks and thrifts.
"Unlike the past, we're spending more time and resources on oversight issues, such as regulatory compliance and business-continuity planning," Cera says. "In a way, it's like Y2K all over again. The resources that you'd normally use to create and build innovative things are being diverted, so it's a balancing act."
Among the IT projects Federal Home Loan Bank plans for this year -- in addition to compliance and continuity efforts -- are document imaging, to reduce the need for paperwork, and developing online real-time data replication for all its applications.
Technologies that enable effective collaboration are becoming critical to business success.