Banking sector to boost IT spending

Mainland banks are forecast to accelerate information technology spending over the next few years as increased competition fuels a nationwide infrastructure overhaul, industry experts say.

IT spending by mainland banks is expected to grow 23.9 per cent per year, reaching US$10.5 billion by 2005, according to a recent report by Massachusetts-based research firm Celent Communications.

Banks are expected to devote spending towards consolidating sprawling and non-standardised IT systems. In addition, service delivery channels such as automated teller machines (ATMs), Internet banking, mobile phone banking, and call centres need to be enhanced.

Although China boasts the world's most extensive banking system - catering to more than a billion people - its banking infrastructure is complex and fragmented. Built piecemeal over the past three decades, the infrastructure is beset with redundant systems, a plethora of disparate computing standards and low levels of inter-regional network connectivity.

Celent senior analyst Neil Katkov said that growing domestic competition to China's largest banks was key to spurring major IT investment in the mainland banking sector, more than the threat of foreign banks entering the market after China's entry to the World Trade Organisation.

'There is intense internal competition, with smaller, regional players winning customers away from the largest banks,' Mr Katkov said.

He noted that smaller banks had built more advanced, 'integrated, multi-channel IT infrastructure over the past five years' compared to China's biggest, state-owned banks - the Industrial and Commercial Bank of China, the Agricultural Bank of China, the Bank of China and the China Construction Bank.