Global banks’ tech revival fuels Indian IT growth

NEW YORK, UNITED STATES — The global banking sector’s renewed focus on technology is injecting optimism into India’s $254 billion IT industry.
Major banks like JPMorgan Chase and Bank of America have resumed technology projects that were previously halted, offering a potential boon to Indian IT firms that derive a substantial portion of their revenue from banking, financial services, and insurance (BFSI) clients.
BFSI demand shows signs of recovery
Recent quarterly reports from leading Indian IT companies, including Tata Consultancy Services (TCS), Infosys, and Wipro, indicate a budding recovery in BFSI client demand.
This resurgence follows six quarters of reduced spending, a trend that began with the collapse of Silicon Valley Bank.
“BFSI should come out faster as they are the ones that went into the caution mode first,” noted TCS Chief Financial Officer Samir Seksaria.
He expressed hope that central bank interest rate cuts and the resolution of U.S. election-related uncertainties would further bolster client confidence.
Major banks boost tech investments
JPMorgan Chase has announced an increase in its annual technology spending by $1.5 billion, reaching $17 billion in 2024.
Similarly, Bank of America has allocated $4 billion for new technology initiatives, including the development of generative artificial intelligence features.
This trend is echoed by the top five U.S. banks, which have collectively increased their tech investments by 6.8% year over year.
According to an American Banker report, the use of AI in customer service is becoming more prevalent, though it faces legal challenges that could impact banks.
Strategic shift towards AI and cloud migration
The renewed investments are targeted at enhancing regulatory compliance, customer experience, and cybersecurity, as well as revamping infrastructure through cloud migration.
Industry executives highlight a strategic shift among BFSI clients towards leveraging generative AI to improve customer experience and operational efficiency.
“I think it’s beyond cost right now. They’re looking forward,” said Mphasis CEO Nitin Rakesh.
Economic factors and future prospects
Analysts anticipate a 50 basis point interest rate cut by the U.S. central bank in September, which could lower borrowing costs and ease financial pressures on IT clients, potentially leading to increased technology investments.
“Lower interest rates in the U.S. generally stimulate economic activity, leading to increased technology investments and larger transformation budgets,” explained Hansa Iyengar, principal analyst at Omdia.
Despite the optimistic outlook, some caution remains. “While this (BFSI improvement) is certainly a glimmer of hope, it is too early to declare a full recovery,” warned brokerage Motilal Oswal Financial Services. Concerns about a potential resurgence in recession fears could still impact client sentiment and spending in the future.