NEEDHAM, Mass. – Financial institutions in the United States plan to invest more strongly in technology, and they are now favoring tech spending with strategic potential over spending to save short-term costs, according to a new survey. Conducted this past summer by TowerGroup for the American Bankers Association and TowerGroup, the large-scale technology survey quantified 2002-2004 spending patterns, investment trends and management strategies of traditional diversified banks. Those FIs expect strategic investments to boost revenues (by enhancing customer relationships) and to reduce costs (by managing risks and making customer service more efficient), the TowerGroup survey found. Thus, strategic technology spending that promises competitive advantage will trump "maintenance spending that provides little differentiation," says the think firm's Bob Landry, citing "the impact of strategic cost management over the past two years." Facing many of the same challenges as do credit unions, the survey shows that consumer banks continue to seek technology for branch renewal, loan origination and market analysis. On another common front, a key investment target will be payment technology to reduce fraud and enhance existing methods of electronic payment. Systems for using check images to clear items also have risen to the top of many financial institutions' wish lists in the wake of President Bush signing the Check 21 bill into law. Imaging technology for consumer and corporate Web sites is also an investment priority. Other survey highlights include: *Top five priorities for technology investment: branch, consumer credit origination, image/document management, Internet sites for consumer banking, and financial control/risk management. *Top five areas of investment in enterprise and technology infrastructure: replacing or enhancing networks, upgrading PC and server hardware and software, upgrading mainframe computers, replacing computer operations centers, and exploiting IP telephony. *Key concerns of banking executives: end-to-end operational resiliency and information security against viruses and hackers. Larger banks are seeking to automate their security policies. *Banks with assets greater than $20 billion plan to spend an average of 4.5% more on technology in 2004 than in 2002. *The largest banks will spend much more on external services (an expected 17.4% increase), chiefly by spending 28% more on business process outsourcing. *Software spending is expected to grow 9.4%. *Technology investments for wholesale banking declined 1.5% between 2002 and 2003, but are expected to grow 5.7% in 2004. -

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