Home / Markets / Mark To Market /  Finance firms' higher digital spend is more than short-term boost for IT companies

The increased thrust of banking and financial services companies on digital transformation could continue to benefit IT companies in quaters to come.

According to analysts at Kotak Institutional Equities, the pace of investment by financial services companies in digital capabilities will likely continue beyond the short term even as firms have not provided clear indications for significant increase in IT budgets.

"BFS firms are continuing to invest in and accelerate a whole host of IT initiatives— cloud migration, development of new software products for digital banking, enhancing features and functionalities in existing products, data, analytics and AI/ML, automation, cybersecurity and regulatory compliance. The spending is across large and mid-sized banks both in the US and Europe," said the Kotak report dated 6 September.

In the June quarter, Indian IT companies saw the BFSI segment report robust performance on a sequential basis. The trend of working from home has to greater cloud migration and this vertical in particular has remained resilient and growth driver amid the pandemic.

Analysts say, demand outlook for this segment is upbeat and bodes well for Indian IT companies. Banking and financial services firms have embraced cloud shift and have accelerated cloud migration and core modernization journey. Companies are viewing this journey as a necessity to remain competitive, analysts add.

"Deal wins for Infosys are healthy - 9 large deals out of 22 were in financial services in 1QFY22. LTI and Mphasis reported strong sequential growth of 9.9% and 8.4% respectively in BFS vertical in the latest quarter," added the Kotak report.

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