Standard Bank's IT costs increased by 13% to over R1.5 billion last year due to its accelerated write-off of PCs, the cost of technology renewal programmes, increased bandwidth costs and smart card preparations.
Last week, the bank posted its year-end results showing a 22% surge in headline earnings to R7.648 billion. However, the rise in profitability came with a cost as the overall cost-to-income ratio deteriorated to 57.5% from the previous year's 56.2% as overall business costs rose 12%.
Herman Singh, Standard Bank's director of engineering technology, says technology renewal plans include the expansion and upgrading of its automatic teller machine network to make it ready for the introduction of smart cards and accelerating the depreciation of its 46 000 PCs from five years to four years.
"Some of these programmes include the renewal of the branch systems; we need increased bandwidth and we have to be compliant with the EMV [the international smart card standard] standards," he says.
Standard Bank's Internet banking service has seen a major bandwidth cost increase as its 350 000 retail and 70 000 corporate customers make more use of the facilities.
"We are finding that more people are using more of the Internet banking features. Some months the Web site sells more products than our largest and most active physical branches. However, this means we have to buy more bandwidth to cater for the increased traffic."
Singh describes the cost of supplying the free MacAfee anti-virus software to Standard Bank's Internet banking customers as "negligible", although he would not say how much exactly, citing competitive reasons.
According to Singh, last year the bank's Web site handled R1 billion in loan applications and the busiest times were about 8am and then again between 4pm and 6pm.
"The problem with that pattern of usage is that people are generally accessing the site from work, but it means a massive peak time spike in bandwidth costs," he says.
Standard Bank is deploying the base technology for the introduction of an intelligent voice recognition system. Singh says the bank is one of the first users of voice XML technology that will help change its branch strategy.
The rise in IT personnel salaries was within inflation rates and was not excessive, he says.
Singh adds that it is difficult to say now if IT costs would increase by the same measure during the 2005 financial year as many of the projects are dependent on how the bank will fund them.
"If the bank continues to do well, funding will not be an issue."
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