March 19, 2014 - A new study conducted by Ovum has revealed that IT spending within the financial services sector is set to increase in the coming years, hitting the $100 billion mark in 2018.

The figures mark a positive trend for the industry, after a number of years of cost cutting and lack of spending in this area.

According to Ovum's research, there is a consensus across capital markets, corporate banking and asset management that technology spending will increase in the coming years, with much of the growth in investment down to IT driving cost-savings elsewhere within the finance industry.

The firm revealed that 2014 is set to be a difficult year for capital markets, following on from a tough 2013. However, despite the concerns during 2013, IT spend increased by 3.7 per cent, with analysts predicting a 4.8 per cent growth in 2014.

Daniel Mayo, practice leader, financial services technology, Ovum, explained that banks are currently looking to renew their platforms and, as a result, are investing in technology and IT for the future of their business.

He added: "This investment will be mostly focused on the front office in order to improve order management systems, but we will also see a continuation of significant investment in the back office to improve automation and scalability levels."

Financial institutions are increasingly looking to move towards a central banking function, which requires the consolidation and improvement of systems in a bid to make them much more efficient. On the back of this, Ovum believes IT spending in this area will record an annual compound growth rate (CAGR) of 6.4 per cent between 2014 and 2018.

IT and technology spending within the asset management sector is also set to rise in the next four years. The industry has recovered from the economic crisis and has now reached its pre-recession levels, meaning firms are willing to begin making significant investments in tech and IT.

Most asset managers are looking to diversify and increase the number of funds that they offer, which is a major driving factor behind the decision to step up IT spending. Ovum believes there will be an increase in spending from two per cent growth in 2013 to a 5.1 per cent CAGR between 2014 and 2018.

Mr Mayo said: "With a current trend of account holders desiring visibility and control, particularly in the digital channels, client servicing systems are having more money placed into them. On another note, with the continuing focus on cost control in asset management, much of the investment marked to improve IT infrastructure has been put on hold."

Corporate banking IT spending is another area of finance that is heading towards a year of outright growth in 2014, with IT spending growth set to increase to five per cent, from just over three per cent in 2013. Much of the investment will be targeted towards providing liquidity management.

"While capital strengthening still remains an important aspect of corporate banking, the focus is shifting to revenue growth," Mr Mayo explained. "Lending is picking up and banks are looking to IT to analyse and understand lending decisions in order to minimise the risk of another financial crisis. This increase in responsible lending suggests that the end of the credit crunch is in sight."