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Thursday June 10, 05:33
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US Banks To Increase Non-Card IT Spend In 2004
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Spending by US banks on non-card payment systems will reach USD 1 billion in 2004, according to Celent, as banks move payments to the center of their strategy and seek to gain competitive advantage. Banks’ IT spending on non-card payment systems will grow by 37 per cent between 2004 and 2003, up from 24 per cent between 2003 and 2002, and 14 per cent between 2002 and 2001. As banks invest in Check 21 technologies and seek greater payments efficiencies, this IT spend will comprise 2.7 per cent of total IT budgets in 2004, versus 2.1 per cent in 2003, and 1.7 per cent in 2002, the Celent report shows.
While warning that “commoditization is looming as the major threat facing payment application makers”, Celent found banks’ overhauling of check processing infrastructure to be driving “this massive capital investment” in payments infrastructure. Spending on check processing technology is tipped to rise by 71 per cent in 2004, up from 59 per cent in 2003, and 38 per cent in 2002. With regard to the USD 1 billion to be spent on non-card payment systems in 2004, USD 600 million will go on check processing, but after 2004, Celent expects spending on check processing to drop in line with falling paper check volumes.
Several major US banks are expected to allocate massive budgetary resources to check processing over the next two to three years, however, to maximize new opportunities in check clearing and retain control of payments as a core business. To keep ‘business as usual’ revenues constant as check volumes fall, for instance, banks need to grow their payments volumes by 6 per cent per year, according to a recent paper from Treasury Strategies. Banks preparing for Check 21 similarly need to involve all their business units in a move to bridge current silos and achieve full cross-functional co-ordination, according to BAI.
(Celent)
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