The Rising Technological Gap in Indian Banks

Indian banks allocate only 5% revenue on IT spends. The disparity between their IT spending and global standards is a significant hurdle to overcome.  According to the BCG report 75% of digital payments and loan and 25% of new digital accounts will originate from third-party platforms by FY26.
 
Banks must prioritize IT spending to bridge the gap with global standards. The focus should be on technologies that deliver the highest returns, such as cloud computing, AI, and data analytics.
 
As per BCG almost 80% of the IT budget was spent on Run the Bank (RTB) as  compared to Change the Bank (CTB) with a focus on keeping the lights on. 
 
The Partnerships can accelerate innovation and access new technologies. The need to invest in skilled IT professionals is crucial for successful technology implementation. Secondly prioritizing cybersecurity measures to protect customer data and maintaining trust is important.

 
BCG projected that a global bank earning net revenues of more than $10 billion would spend 9.1% of that on upgrading IT infrastructure. In comparison, its Indian counterpart would only spend 3.2%. While a global bank making net revenues between $1 billion to $10 billion would allocate 7.2% of that as IT budgets, where as an Indian bank would spend only 3% of that on IT. 
The global financial industry has been rapidly changing with the advancement of financial technology over the last few years. The pace of fintech development in developed and emerging economies countries is different. At the same time, customers increasingly expect seamless digital experiences. Insufficient IT investment can lead to poor service quality and customer churn. To remain competitive, banks, along with traditional banking, adopt fintech products to provide more efficient services to their customers to satisfy their needs. 
 
In today's threat landscape, robust cybersecurity is essential. Inadequate IT spending can expose banks to significant risks. The financial sector is heavily regulated. Outdated technology systems can hinder compliance efforts and lead to penalties.
 
It is crucial for Indian banks to recognize that technology is no longer a luxury but a necessity. By making substantial investments in IT, they can position themselves for long-term success in a rapidly evolving financial landscape.