The 2014 Financial Services Council-DST CEO Survey Report, which was released this week, has found that efforts by businesses in the Australian financial services sector to comply with regulatory changes have drawn considerable resources away from their ability to invest in IT innovation.
The report said that much of the current spending on IT in the sector is being directed to "business-as-usual" (BAU) projects as firms struggle to comply with regulatory changes.
Over half of survey respondents spent less than 25 percent of their IT budgets on innovation projects rather than BAU. A further 31 percent spent 26-50 percent on innovation and the remaining 14 percent spent 51-75 percent on innovation.
John Brogden, CEO of the Financial Services Council and former New South Wales Liberal Party member, said that over the past three years the financial services industry has focused nearly "100 percent" of its time and resources implementing processes to comply with new regulation.
"This year's survey ... shows the negative impact regulatory changes are having on the industry's ability to innovate," Brodgen said in the report. "Over the past three years, time and resources have been directed away from developing new products and processes to comply with new regulation."
"It is critical that the industry moves on from regulatory reform to focus on what it does best — providing new and innovative solutions and products to clients," he said.
The report also cites new budgetary cuts to federal government support of innovation programs as potentially impacting the level of technology development among Australian businesses.
"Company level innovation will clearly have company-specific benefits but there are also often public benefits," said the report. "As a result there is a role for public policy in fostering innovation. In Australia, this is often delivered in the form of tax breaks and subsidies for companies that invest in new ideas.
"More recently, however, a shift has been underway in this area of public policy with a reduction in the level of public funding to support innovation. This is reflected in 2014/15 Budget decisions to reduce both industry-specific and more general programs," it said. "The importance of innovation as a driver of productivity growth means governments have an interest in ensuring such practices are encouraged."
The survey report comes just months after one of Australia's largest financial institutions, Commonwealth Bank Australia, unveiled the rewards of its AU$589 million investment in technology, productivity, and risk over the six-month period ending December 2013.
As a result of the investment, the bank was able to able to introduce a new app, which now has over 1 million registered users; video conferencing across its network of branches; smaller, smarter express branches that focused on self-service; and more simplified processes that saw an 80 percent reduction in online account opening times.