Moody's - Global investment banks spend $72 billion annually to combat fintechs, stay competitive

Frankfurt am Main, February 19, 2020 - Global investment banks (GIBs) are spending an average of $72 billion annually on IT to protect their revenue from the threat posed by fintech companies, as well as stay competitive with their peers, according to a survey by Moody's Investors Service. However, many banks also see significant opportunities in partnering with fintechs to develop better services for their customers.
The survey shows that the world's biggest banks are developing their technology to enhance their digital platforms and, on the whole, have the scale, talent and capital resources to compete in an increasingly digital marketplace.

"Sustaining these investments and smartly executing digital strategies will be important to help fend off the threat from fintech firms as they continue to test the boundaries of the banking business, particularly in the simpler retail products and payment services that account for about a third of the investment banks' revenue," said Michael Rohr, a Senior Vice President at Moody's Investors Service. "These investments are also essential for the banks to keep up with their peers."

In the period from 2017 to 2019, the GIBs invested an average of 18.3% of their total operating expenses, or about $72 billion annually, on IT, including retail infrastructure and applications. More importantly, the percentage of total operating expenses allocated to IT has steadily increased over this period.

The US GIBs are leading on this front because their superior scale and profitability allows them to spend a greater absolute amount on new digital infrastructure than their less efficient European peers.

Subscribers can access the report at: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1214270