Big four bank Absa will spend R8 billion on upgrades and new IT infrastructure over the next three years, as it gears up for growth and puts systems in place to handle a slew of new regulations.
The bank has a customer base of 11 million customers, of which two million use mobile banking. It has about 9 000 ATMs around the country and 1 000 branches. Absa intends growing this base by expanding its offerings and growing on the continent, which will require an increased investment in IT systems.
Absa earlier this week released its results for the six months to June and indicated that its “strategic initiatives” required additional investments in technology, because of the need to replace legacy systems, enhance end-to-end processes and adopt Basel II.
The financial services sector has been under pressure recently, as cash-strapped consumers remain highly indebted and lending continues to be slow. Absa reported a minimal 1% increase in net profit in the first half of its year.
Can't wait
Deputy group CEO Louis von Zeuner tells ITWeb that “top line growth is under pressure and the volume is not there, but one cannot delay the spending”. He adds that IT is one of the company's top priorities.
Absa's planned R8 billion in new IT projects will be evenly split between continuing to run, which will include investing in new systems to cater for regulatory changes, and its growth plans, he says.
Last year, the bank spent a total R4.5 billion on IT. However, this amount also included non-capital items, such as operational expenses and depreciation of assets. This year, Absa expects to spend a total of between R5.5 billion and R6 billion, of which R2.6 billion has already been spent, says Von Zeuner.
Absa has also invested in disaster recovery, business continuity and building IT capacity, adds Von Zeuner. During the first half of the year, the bank upgraded data centres and enhanced its foreign exchange capacity, according to the bank.
Billions to come
However, Absa's IT spend will increase as the company invests in more systems to cope with pending legislative changes and its African expansion plans, says Von Zeuner. “What is important for us going forward is to position ourselves for regulatory changes.”
New legislation, which requires investment in IT, includes the pending Privacy of Personal Information Bill, the new Consumer Protection Act and the amended Companies Act, which comes into effect in October.
Von Zeuner explains that the new investments will go into data centres, its foreign exchange systems, and electronic banking is being enhanced. He says it is important for the bank to build capacity, which requires enhancing its IT systems.
This year, Absa will spend R100 million just on electronic banking as it expands the offering to its commercial base. Von Zeuner says growth in electronic banking is outpacing growth in traditional channels.
The bank expects to leverage off its relationship with UK-based Barclays, which owns 55.5% of Absa, when sourcing some of the IT requirements, as this will allow it to benefit from economies of scale, says Von Zeuner.
However, local companies will also have an opportunity to supply technology, as Absa will issued requests for proposals for individual projects as required, he adds.
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