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European FSIs Focus on Core Systems

Although budgets remain flat, banks and insurers in Europe spend more on infrastructure to gain efficiencies.

As part of an effort to chip away at the costs associated with maintaining their complex and legacy-laden infrastructures, almost seven in 10 European retail banks and insurance companies-most of which are working with stagnant budgets-are planning to grow their IT spending on infrastructure in 2003.

These findings were part of London-based Datamonitor's recent study, "IT Strategy in Financial Services European Financial Services Institutions Perspectives." The report indicates that banks and insurers are focusing slightly more on longer-term cost-reduction measures, as opposed to short-term cost-cutting strategies, which were the focus of respondents in the 2002 edition of the study, reported Sian Jones, financial services technology analyst, Datamonitor.

Among the ways insurers are seeking to find efficiencies and gain long-range savings is desktop standardization, the study found. This is due in part, said Jones, to the fact that in western Europe multi-subsidiary insurance companies are quite common and generally they are plagued with duplication.

Meanwhile, the Datamonitor study found, banks are undertaking projects aimed at creating synergies among their servers and data center. But it's not all about scaling back. For 2003, core systems are expected to be the next-most significant area of spending growth for European banks and insurance companies. The study that found that 47 percent of financial services institutions have increased their investment in core systems.

Additionally, Jones noted, rather than system replacement, institutions are opting for shorter-term fixes such as "wrapping" core systems in order to achieve higher levels of data integration.

Financial institutions are also coming up with funds to complete channel integration projects. According to the Datamonitor survey, 57 percent of retail banks had either built a middleware platform linking all channels or had integrated some of their channels into a single multi-channel delivery platform. However, although channel integration is on insurance company radar screens, Datamonitor contends the area is less of an issue for carriers than it is for banks, and therefore finds insurance companies are spending less than banks do in that area.

The Datamonitor study's sample included 150 retail banks and insurance companies across the UK, France, Germany, Italy, Spain, and Benelux and Nordic countries.

Editor's note: This article originally appeared in Insurance & Technology, a sister publication of Bank Systems & Technology.

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