IT Spending Trends in the Japanese Banking Industry

by Neil Katkov, PhD, May 8, 2008


Japanese banks' IT spending should continue to increase. IT spending approached US$14.7 billion in 2007 and will expand to reach US$18.2 billion by early 2012, with a CAGR of 5.9%.

Since 2003, improved corporate performance and personal consumption have spurred a market recovery in Japan. In the banking sector, improved earnings have fueled the return to a more assertive approach towards business strategy, according to a new Celent report, . As banks have reached the home stretch in repaying borrowed public funds, they have begun to actively seek lending opportunities for companies and individuals while working on strategic initiatives to attract mass affluent customers.

City banks are aggressively taking action in the wholesale business arena with the hope of strengthening their global strategies. Both first tier and second tier regional banks are striving to implement community-based strategies and retain customers while working to expand their branch networks and services to drive growth in their customer bases. New players such as Internet-based banks and entrants from other sectors are appearing as megabanks, with vast customer bases and branch networks continuing to expand their influence. Entrants from other industries are also placing increased pressure on small community-based regional banks and credit unions.

"The addition of Japan Post Bank to the banking community will drive increased IT spending across the industry," says Yumiko Manchu, an analyst with Celent's Asia Research Group and author of the report. "Megabanks' ongoing systems consolidation projects will also contribute to increased spending."

Once systems consolidation has been achieved by the end of fiscal year 2011, operating costs are expected to decrease, and the growth rate of IT spending will slow but not stop. When companies have completed systems rationalization, they will intensify strategic spending initiatives, ensuring that IT spending in the banking industry will experience continued growth.

This report provides an outlook for the future of IT investment in the banking industry while offering a survey of the business landscape for domestic banking. It analyzes the sectors in which banks will be focusing their IT spending in the future.

This 30-page report contains 13 figures. A table of contents is available online.

Members of Celent's Retail Banking and Wholesale Banking research services can download the report electronically by clicking on the icon to the left.  Non-members should contact for more information.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

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Table of Contents


Executive Summary 3
Definitions 5
Business Environment 7
Wholesale Banking Trends 10
  Upgrading Core Banking Systems and Adoption of Shared Systems 10
  Cash Management Services 11
  Lending System Replacement 11
  Anti-Money Laundering 12
  Compliance 12
  Integrated Risk Management 13
Retail Banking Trends 14
  Over-the-Counter Sales 15
  CRM and Wealth Management 16
  Branch Strategy 17
  Multichannel Strategies 17
  Expansion of Securities Services 18
Banking Industry IT Spending Trends 19
  Industry Spending Trends 19
Conclusion 25


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