Financial crisis affects banks' security spending

CAPE TOWN, SOUTH AFRICA: The current economic meltdown has affected sales in the global market for physical security solutions in banking and financial institutions. This is particularly the case in North America and Western Europe, due to branch closures and consolidation.

Banks review their security spending every semester and it is expected that they will put large and medium sized projects on hold in the effort to consolidate their balance sheets. However, solution providers will remain buoyant due to banks’ needs to protect their valuable assets from both physical and IT attacks. According to Frost & Sullivan's latest analysis, the global market for electronic physical security in banking and finance earned revenues of $936 million in 2007.

“The critical need for security in banks will help in some way to sustain the spending for physical electronic security,” observes Frost & Sullivan Industry Analyst Matia Grossi. “However, the growth rates in 2008 and 2009 are expected to be at least two per cent lower than the peak in 2007.”

Since the electronic physical security market in the banking and financial institutions sector is very mature, it is sensitive to the shrinking of the installed base of bank retail branches and financial institutions. The huge installed support of analogue security equipment also makes banks reluctant to make the transition to Internet Protocol (IP) technology.

At the same time Greenfield deployments, where latest technologies and systems are usually installed, are expected to be put on hold as new branches are unlikely to be opened.

“Focusing on the applications of security systems beyond traditional security applications, for example in customer relationship management, is one of the keys to succeeding in these challenging situations,” notes Grossi.

Greater customer awareness about the advantages and new functionalities of IP-based systems drive banks to maintain their current level of spending in electronic physical security, even in the present difficult times. Furthermore, regulatory and insurance requirements compel banks to sustain a required level of physical electronic security.

“Once the situation is normalised, banks are expected to increase their spending once again,” Grossie states. “By 2013, the worldwide spending for electronics physical security is expected to reach $1,463 million.”