Philippine banks IT spending to grow ahead of regional peers

Spending by banks in the Philippines on technology is expected to show one of the highest growth rates in the region, according to study.

Philippine banks are on track to spend some US$338 million on IT and related financial technology this year, according to research firm Financial Insights.

A report released by Financial Insights predicts banks' IT spending will grow by a compound annual growth rate (CAGR) of 8.5 percent from 2007 to 2010.

Michael Araneta, senior research manager, Financial Insights Asia-Pacific, said in a statement: "We believe the Philippine banking sector will show one of the highest growth rates in technology investments in the Asia-Pacific region excluding Japan."

Araneta highlighted areas such as remittance, consumer banking and lending as holding "bright prospects" for the country's banking sector.

Accordingly, a survey conducted by Financial Insights on 16 Philippine banks showed top priority spending areas were risk management projects, channel rollouts, core banking upgrades and lending-related systems.

"Large banks are expected to focus on getting efficiencies out of their recent investments, finding opportunities for scale, and rationalization.

"Smaller players, meanwhile, will increase their spending on foundational investments, as well as on discrete projects that will win market share for them. There will also be project related loans origination, remittance, cash management, and payments," said Financial Insights' statement.

Araneta said, on mergers in the market: "Senior executives we spoke to admit to investing especially in channel-related technology to compete more effectively against suddenly larger peers."

Should the consolidation happen, the banking landscape will polarize into a handful of anchor banks on one end and smaller niche players on the other, added Araneta.

Araneta notes customer-oriented initiatives "have not been so well-defined", however. "There are pockets within banks that are keen to understand the customer more effectively and, from there, craft differentiated responses to unique customer requirements.

"However, these still have to find momentum," said Araneta.