China’s banking industry IT solutions market is expected register a compound annual growth rate of 21.9% over the next five years to hit US$9.2 billion in 2020 as banks embark on digital transformation in order to remain competitive.
This is according to the China Banking Industry IT Solutions Market Share Report and China Banking Industry IT Solutions Market Forecasts released by IDC recently.
China’s banking industry IT solutions market expanded 23.5% in 2015 from a year earlier to reach US$3.4 billion, but it still remains highly fragmented, the two reports showed. The top five IT solutions vendors in the banking industry: Yusys Technologies, Pactera Technology International, DCITS, IBM and Client Service International only held a combined 25% market share in 2015. Breaking it down, the core business system market remained the largest market segment with a value of US$0.7 billion in 2015, accounting for 20.96% of the entire market, followed by business intelligence, risk management and credit management systems, the reports showed.
IDC believes China’s banking IT solutions market is entering a period of consolidation. As traditional banks keep improving their client management, their demands are undergoing profound changes, requiring a higher level of performance from the management and professional service capabilities of IT solution providers.
Large commercial banks are increasingly looking internally for their IT solutions. Mid-sized city and rural commercial banks are thus becoming the principal clients in the IT solutions market, while small banks tend to prefer purchasing professional cloud-based services. In the IT solutions market, the delivery model is shifting from “software + service” to one dominated by services, a shift that extends from large commercial banks to city and rural commercial banks.
The size of China’s overall banking IT market was US$12.5 billion in 2015, up 11.9% from US$11.2 billion in 2014. As the interest rate liberalisation reform deepens, traditional banks are reforming and redesigning their IT infrastructures. IT engineers have to rethink business procedures and business models, designing and developing a new set of information systems adapted to the ongoing interest rate liberalisation reform. Therefore, significant changes are taking place in the banking IT market. Generally speaking, the banking industry is pouring more money into product and service innovations and strengthening compliance and risk control, while investment in hardware is dwindling.
China’s banking industry is facing the challenges of an economic slowdown, interest rate liberalisation and Internet finance, while banks’ operational environment is undergoing profound changes. Digital transformation is the only way the banking industry can thrive going forward. As traditional banks keep improving client management, their demands on IT solutions providers are changing as well. IT solutions providers should keep improving their professional experience and specialised service abilities to cater to their financial customers’ fresh demands for innovation.
“China’s banking industry IT solutions market should maintain steady growth as it enters a period of consolidation,” says Fang Zheng, senior research manager at IDC China. “Specialised services will continue to be an important development trend in the banking IT solutions market.”