Tech Spending During COVID-19: The Road to Normalcy in 2021
The initial shock and prolongued effects of the pandemic are causing financial institutions to rethink their long-term strategic IT spending objectives. In 2020, the industry saw a broad reprioritiztion towards investments into infrastructure to enabled remote operating models, platforms to support government assistance, and digital customer engagement. Most banks maintained a holding pattern for IT spending throughout most of 2020, taking a "wait and see" approach and bolstering reserves against potential economic fallout. While some investments were maintained, many were deferred.
In 2021, although COVID-19 and the effects of the pandemic still linger, the industry is beginning to rebound. Celent identifies a few key trends which will affect IT spending this year.
- Banks in many markets weathered the economic fallout better than expected, with recovering economic activity and large cash reserves providing reinvestment opportunities. Profitability remains higher in NA and the EU, while some cost pressures persist for LATAM and APAC.
- Vendors are experiencing healthy pipelines for new initiatives, noting that many of the selection processes which were continued throughout 2020 resulted in a flurry of pent-up activity so far in 2021.
- Banks are reinvesting into digital customer experience and plugging some of the gaps in digital delivery made apparent during the pandemic. Celent surveys indicate an acceleration of digital transformation and cloud migration timelines by around 2 years for many.
At the beginning of each year Celent releases its annual IT spending in banking report, looking at the change and growth in IT spending by banks throughout the globe across multiple dimensions. As a result of COVID-19 and the general availability/reliability of data, this report takes different approach to the traditional IT spending analysis, looking more at scenario planning rather than forecasting.
Few were ready for the impact at the outset of the pandemic in 2020, and even fewer were prepared for the lingering effects it would have into this year. We’re still in the “long haul” to normalcy, and while some clarity is emerging regarding IT spending, there is still too much uncertainty in the banking industry. Celent will continue its previous report series with the goal to resume traditional spend forecasts in late 2021/early 2022.