HSBC's annual IT spend to hit $5bn

HSBC's annual IT budget is expected to rise to almost $5bn next year as the world's third largest bank targets "global innovation" in its core systems.

In a presentation to analysts this week HSBC group CIO Ken Harvey said the extra spend will be offset by a 10 per cent cut in processing costs.

Harvey said the bank is now reaping the benefits of three years of sustained investment in technology which has resulted in one global, self-managed network, a reduction in data centres - from more than 120 in 1996 to less than 20 this year - and almost half (42 per cent) of IT development work now done in low-cost offshore centres.

One example of the benefits is the $43.4m annualised IT cost savings from migrating all the bank's global credit card units onto the Whirl platform that it got through the 2003 acquisition of Household Finance.

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The reduced transaction processing costs have allowed HSBC to handle a 25 per cent credit card growth at no incremental cost. Harvey said HSBC is on target to cut transaction processing costs by another 11 per cent this year.

The investment in technology is leading to more of HSBC's business being handled through lower-cost online channels. Tracy Redies, CEO of HSBC.com said more than 70 per cent of all transactions during the first half of 2006 were conducted through direct channels including the internet and telephone.