Global Markets for Retail Banking Technology

Report Highlights

• Worldwide spending on retail banking solutions grew by more than 20% per year between 1998 and 2000, slowed to a 14% growth rate in 2001, and is expected to drop to about 3% in 2002.
• The global market is expected to achieve an average annual growth rate (AAGR) of 9.4% exceeding $86 billion by 2006.
• Operations support solutions are expected to show the largest absolute increases in annual sales between 2001 and 2006.
• The North American market will experience the lowest annual growth rate (4.7%) of any regional market.
• The Asia-Pacific markets, especially the emerging economies, will experience the fastest growth of any major market.

INTRODUCTION

STUDY GOALS AND OBJECTIVES

The goal of this study is to provide an overall view of the global market for retail banking solutions. "Retail banking solutions" encompass a wide range of technologies and applications, including:

• the core or back office processing systems that form the basis of retail banking service providers' (RBSPs') IT platforms; these provide central accounting, customer information management and transaction-processing functions (Some "whole bank" core systems support both retail and wholesale or commercial banking operations, but retail and wholesale core processing solutions generally are distinct.)
• customer-facing solutions that RBSPs use to interact with customers, by providing products and services that they want through channels they regularly access (branches, ATMS, Internet, etc.)
• supporting or ancillary solutions (e.g., security, compliance) as well as the middleware that RBSPs use to link their customer-facing applications to their core systems.

The analysis is intended to facilitate strategic decisions by answering such questions as:

• What are the factors driving market growth for retail banking solutions?
• Which market segments (type of technology, geographical markets) offer the best growth opportunities?
• Who are the market leaders in these segments?
• What features and functionalities are needed for success in these markets?
• How will new technologies such as m-commerce and voice technology affect the market?
• What are the advantages and disadvantages of different distribution channels (e.g., application service providers) in reaching various market segments?

BACKGROUND

Various studies have been published in the last few years analyzing different segments and subsegments of the international market for retail banking solutions. But until recently, there have been no comprehensive studies of overall trends in the market and the macro- and microlevel factors driving these market trends. In early 2002, Tower Group released a research report entitled, "Global IT Spending for Retail Bank Delivery Channels." It covers the period from 2001 through 2005.

While Tower Group's findings are useful, the present study takes a more in-depth look at underlying market forces, including the economic recovery apparently now underway but which could not be accurately forecast when Tower Group was preparing its report. This study of the global market for retail banking solutions through the year 2006 incorporates the latest information on and technical trends in the United States and other key international markets and analyzes their impact on vendors of these products and services.

INTENDED AUDIENCE

The report is intended for decision makers in the retail banking and related technology sectors, including:

• chief technology officers of retail banks and other retail banking service providers
• retail banking solution providers
• integrators and consultants.

SCOPE AND FORMAT

This report is an analytical tool whose primary purpose is to describe the international market for retail banking technology. It consists of the following major sections:

• industry structure
• market size and segmentation, including market drivers and historical and projected sales by product/market segment (e.g., geographical markets, end-user industry and company size)
• user requirements, competition and market shares
• conclusions: trends in retail banking technology/functionality, emerging markets, industry structure.

METHODOLOGY AND INFORMATION SOURCES

The findings and conclusions of this report are based on information gathered from vendors, users of retail banking technology and other informants. Additional data were obtained from extensive reviews of secondary sources such as trade publications, trade associations, company literature and on-line databases.

Wherever possible, historical data through the end of 2001 were used as the basis for analysis and projections. However, for certain market segments, specific data beyond 2000 were incomplete or unavailable at the time this report was prepared. In these cases, year 2000 data were used and documented accordingly.

The number and diversity of the world's markets for retail banking solutions make it difficult to generalize from conditions in the United States and a few other developed economies to the global market as a whole. Therefore, we have divided the world into eight regions for separate analysis. In most regions, we also have selected one or more individual countries for a closer look based on their individual importance and/or how they represent conditions in their regions. The eight regions, as well as the individual study countries, are as follows:

• North America
  •  United States
• Developed economies of Europe (i.e., EU, Scandinavia)
• France
• Germany
• UK
• Emerging economies of Europe (including Central and Eastern Europe and European republics of the former USSR such as Russia and the Baltics)
• Developed economies of Asia
• Australia
• Japan
• Singapore
• Emerging economies of Asia
• China
• India
• South Korea
• Taiwan
• Middle East (including the Arab states, Israel and Iran)
• Latin America
• Brazil
• Mexico
• Africa
  • South Africa

Our final analyses and projections are based on a combination of a consensus among the primary contacts combined with our understanding of the impact of trends from a historical and analytical perspective.

All dollar projections presented in this report are in 2001 constant dollars.