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The banking industry in the Asia-Pacific region will show good growth, despite a potentially turbulent year for the financial services industry worldwide.

"There are several mistaken generalisations about what will happen in Asia-Pacific banking in 2012," says Michael Araneta, Research Director for IDC Financial Insights Asia-Pacific. 

IDC corrects the notion that many institutions will either fold up or exit the industry, leaving fewer players across the sub-regions, including Asia-Pacific.

"Instead, we expect that even more institutions will compete in our region and drive yet more ferocious market competition, even in already mature banking segments," says Araneta.

IDC expects a 5.8% growth in the number of banking institutions from 2010 to 2011. It also anticipates about the same growth in 2012.

Several trends from the list of IDC Financial Insights' top ten predictions point towards a dynamic market in the region in the year ahead. The top ten predictions for 2012 are:

1. The number of banks will grow even further. 

2. IT spending growth will decelerate as banks drive down cost ratios to unprecedented levels.

3. Spend on risk management will account for 15 percent of IT budgets.

4. Longer core banking project implementations will become more acceptable.

5. Asia-Pacific banks won't be hit hard by Basel III-related provisions, but can still stumble on the indirect burden of compliance. 

6. The ASEAN Economic Community (AEC) makes banks think "super-regional”.

7. Banks will become more willing to allocate considerable IT dollars to innovation programs.

8. Big Data will find its first successful use cases in risk management and fraud management.

9. The benefits of private and hybrid clouds will gradually relax anti-cloud computing positions.

10. Speed and real-time capabilities are the competitive differentiators to watch out for in 2012.

In the area of IT spending, IDC Financial Insights expects banks' external IT budgets to expand by an average of 7% in 2012 over 2011. The growth rate is lower than what the industry has been accustomed to in the past years, reflecting a wait-and-see mindset taking hold in the industry at large.

However, Araneta adds, "There are also some industry segments and functional IT areas that will see robust IT spending growth. In general, we see healthy IT spending from banks in large, geographically dispersed markets, as well as mid-sized banks that are attempting to be tier 1 players."

Other areas of high spending growth include phased investments in new core banking systems, and their follow-on projects in channels, business process management, and product management systems.

Araneta highlights plans of banks to further invest in risk management and compliance, representing a second round of spending on critical systems and process standardisation activities that allow banks to cope with adverse economic conditions.
 

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