US banks are to spend $118 billion on IT in 2005, more than in the previous year, while spending by financial services firms is predicted to grow by 4.7 per cent per year through 2008 up to 136 billion, according to the TowerGroup. Banks will account for the largest chunk of spending in 2005, at USD 50 billion, with insurance companies at USD 36 billion and securities / investment firms in third place at USD 31 billion. Payments, security, multi-channel integration and branch automation will be on the top priority list for the coming year.

Spending on maintenance of older systems will fall from 64 per cent in 2005 to 58 per cent in 2008 and investment in new technologies will increase from 29 per cent of IT budgets in 2005 to 40 per cent by 2008, according to TowerGroup. Outsourcing, professional and hosting services will take a greater share of IT spending through 2008, while infrastructure consolidation will be seen as lead-in to new revenue-generating activities. Competitive differentiation will be driving force for US retail banks’ IT spending in 2005, while financial institutions will seek to adjust newer technologies to raise their business goals to the maximum level.