The new Infosys Bank Tech Index has been designed to provide an important and clear snapshot of how banking executives in Australia and New Zealand align and differ from peers across the world – across strategic issues such as technology budgets and talent to fuel AI initiatives and more.
While industry headwinds force banks to focus on reducing costs, the Index reveals the opposite to be true for technology investments. Australian banks spent $1.2 billion in the most recent quarter, with capex tech spend accounting for 68% of the total. Further, we identified plans to increase total spend by 5.3% in the next quarter, with opex spend rising at a quicker pace than capex. This illustrates the value of technology and innovation to deliver market-leading differentiation. Australian banks lead the world in areas such as digital banking – and from our candid discussions with senior leaders at the Infosys APAC annual conference a few weeks ago, this commitment to service excellence continues to drive strategic investment in technology.
Differing from global peers on strategic priority
Data from the survey also revealed that for Australian bankers, transforming the business model is the primary strategic priority. The need to provide enhanced digital services is making banks re-evaluate their service delivery model. This differs from banks across the rest of the world (North America, Europe and APAC ex-Australia), as they indicated that reducing costs was their top priority. Australian banks were also focused on complying with regulations, significantly diverging from banks in the rest of the world, who were relatively less worried about the regulatory environment.
In terms of their budget allocation, banks in Australia continue to invest in open banking, cloud computing and cyber security. Survey data show that open banking efforts make up 18% of tech budgets. Regulatory mandates, to share banking data with third parties via APIs, has led to the creation of a growing marketplace offering customers varied choices in navigating their financial well-being with greater confidence. This has spurred financial services providers to further strengthen digital experiences and services – and that trend will continue at an accelerated pace.
Cloud computing started as a technology for safe storage of data and to cut hardware costs but soon emerged as the de-facto standard for business growth and transformation, across all sectors, banking included. Bendigo And Adelaide Bank for example, recently consolidated its document management system that laid the foundation for lending transformation. This improved staff efficiency and made lending to customers quicker.
Where Australian banks also differ from their global peers on tech budget allocation, is on real time payments. They allocated 16% of their budgets versus only 10% among banks in other regions. Banks such as ANZ are leveraging technology to create payments-as-a-service models – with their PayTo service for customers, that clears funds and settles via the NPP infrastructure in near real-time.
Leading in AI requires a skilled talent pool
AI however, received much lower allocation among Australian banks compared to the rest of the world. With AI, Banks can benefit significantly in terms of productivity gains, error reduction – and the ability to rapidly identify patterns, improving predictive abilities to meet customer demands with greater accuracy. Westpac, for example, uses AI to glean insights from its business customers’ cashflows to make quicker lending decisions. Yet, Australian banks appear to be struggling – not so much due to their willingness to spend on AI, but with their ability to find the right AI talent. However, on generative AI specifically, we found that Australian banks spend their money more effectively and create greater business value from their initiatives, when compared to their global peers.
The Infosys Bank Tech Index revealed that AI skills were by far the most difficult to access for banks across the globe, with banks in Australia finding it difficult to hire and build these skills. To narrow the talent gap and retain high performing employees, Infosys works with our banking clients, sharing how we invest in reskilling and training to nurture employees’ strengths. Over a 100,000 Infoscions globally are already trained on generative AI and through our learning platform Springboard, we are educating communities outside of our organisation on AI. We also attract top talent by offering them the opportunity to collaborate on AI projects that set the pace for the industry.
It’s not just in AI: Australia has a significant wider shortage of tech skills – the country will need 6.5 million newly skilled and reskilled digital workers across industries by 2025 to meet future demand. This deficiency is quite visible among banks – while across the world banks plan to increase technology hiring by 4.1%, in Australia that figure is nearly double at 7.4%.
While banks are taking a cautious approach in this uncertain economic environment, with growth slowing to 1.2%, from the 1.8% in 2023, all is not bleak. Inflation may modestly decline and the Reserve Bank potentially will lower rates in the second half of 2024 to boost the economy. Despite this, frugality may endure as margins are expected to compress and profitability will come under pressure with banks looking to optimise costs. But as our research suggests, this is not necessarily translating into lower tech spend.
As Infosys gathers data in coming quarters, we will keep you updated on the tech spending trends, track evolving talent patterns and help share peer insights to drive informed decisions that contribute to strong investments with greater confidence.
The Infosys report, Infosys Bank Tech Index, includes data from the referenced survey as well as further insights.
About the Author:
Andrew Groth
Executive Vice President
Industry Head – Financial Services,
Regional Head - Asia Pacific
Andrew is the Region Head for Infosys AsiaPac and is part of the Global Financial Services Executive. Having lived and worked across Europe, Asia Pacific and the United States, Andrew has rich strategic experience with many of the largest organisations in the world – including major financial institutions. Andrew is a Senior Associate of the Australian and New Zealand Institute of Insurance and Finance, a Graduate of the Australian Institute of Company Directors and holds an MBA from the Australian Graduate School of Management.