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Right-sizing IT spending in Asian banks

Do Asia-Pacific financial services institutions need to spend more on IT operations to avoid losing market share to non-conventional players? Jeffrey Bahar, Deputy Chief Executive Officer of Spire Research and Consulting, discussed this view in FST Media.

According to a McKinsey report, organizations that provided financial services in emerging markets – especially in the Asia-Pacific region – needed to spend more on IT operations. The study showed a dip in emerging market IT spending out of total operational costs from 9.4% in 2010 to 8.1% in 2012. On the contrary, IT spending in European banks averaged as high as 19% in 2012.

Bahar commented that IT spending in mature markets cannot be compared to emerging markets. This is because stringent regulations had stoked higher IT spending in mature markets as compared to emerging ones.
The report also suggested that spending on IT infrastructure improved overall efficiency; which was why banks in mature markets functioned effectively. Bahar remarked that top-tiered banks in emerging markets would take longer to make IT spending decisions, due to the complexity of operations and business processes. But second-tiered banks might take technology adoption decisions more quickly.

Bahar explained that top-tiered banks should ideally form a working committee or division to push through new technology implementations and to better overcome the challenges of integrating new technologies with old processes and legacy systems.

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