Financial institutions face rising IT budgets as they balance innovation, legacy and regulation, says Celent, a GlobalData company. Firms across banking, insurance, and capital markets are preparing for a year of measured technology investment, where the need to modernize core platforms meets the urgency to scale artificial intelligence and reinforce data governance. With average IT budgets projected to rise by around seven percent, the main challenge is not whether to spend but how to allocate. Leaders are refocusing on business value, execution risk, and operational resilience as the deciding factors for each initiative.
Celents global survey of more than one thousand executives shows continued momentum behind technology programs, but with wide variation by sector and strategic priority. Institutions are concentrating funds where returns are clearer and execution paths are pragmatic. That means tighter controls on experimentation, closer alignment of business and technology roadmaps, and renewed attention to benefits tracking. The intent is to reduce stranded investments and shorten time to value while still advancing capabilities that differentiate client experience and risk control.
Insurance is setting the pace in digital transformation. Life insurers expect IT budgets to grow by about 13.8 percent, with property and casualty close behind at 12.9 percent. Many carriers are moving from proofs of concept into enterprise rollout, targeting operational efficiency and better decisioning. As Tom Scales, Principal Analyst at Celent, puts it, Budgets are rising, but so are expectations. Choosing the wrong technology bets can have real competitive consequences. It is encouraging to see life and annuity insurers investing to close long standing gaps. In practice this means applying generative and agentic AI to underwriting support and service operations, expanding automation in claims and policy administration, adopting real time data platforms for faster insight, and strengthening real time risk monitoring. Core system modernization also remains a priority as insurers work to simplify product support and reduce technical debt.
Banks are closer to the industry average, with corporate banks anticipating IT budgets to rise by roughly 5.8 percent. The direction is upward, but discretionary room is tighter. The largest institutions are making major platform and data investments while most spending remains mandatory, either to keep the lights on or to meet regulatory obligations. Gareth Lodge, Principal Analyst at Celent, observes, Corporate banking IT budgets will continue to grow, but so will the pressures on them. New technologies create opportunities and raise expectations. Each innovation such as generative AI brings ongoing operational costs and frequent upgrades. Banks must invest in advanced capabilities for sophisticated clients while maintaining legacy systems on which existing clients still rely. The result is a delicate balance between modernizing core payments, lending, and trade platforms and supporting well used legacy capabilities that remain central to client relationships.
Capital markets firms, especially on the buy side, expect the smallest budget increases at about 3.7 percent. Margin pressure keeps the spotlight on efficiency and scale. Consolidation continues, yet technology enablement remains crucial for differentiated strategies, client relevance, and risk adjusted returns. According to Cubillas Ding, Capital Markets Research Director at Celent, firms will execute on parallel tracks. They will operationalize AI for research, portfolio construction, and client reporting while advancing digital and cloud migrations of core systems. This dual approach preserves resilience and control while unlocking incremental productivity.
The practical implications are clear. Institutions are revisiting data operating models to support AI safety, lineage, and access control. They are tightening model risk management, explainability, and validation as AI moves deeper into production. Cloud adoption continues with greater attention to portability, observability, and cost management. Vendor portfolios are being rationalized to reduce overlap and improve integration. Talent planning is also in focus, combining upskilling with targeted hiring in data engineering, platform reliability, and AI engineering. Across all of this, governance and measurement matter. Firms are establishing clearer outcome metrics for each program, linking technology milestones to business performance indicators such as time to onboard, straight through processing rates, loss ratio improvement, or cost per trade.
Leaders are shifting from scattered pilots to scaled delivery. That starts with a realistic assessment of legacy complexity. Some core platforms will be replaced. Others will be modernized in place through modularization, service exposure, and event driven integration. Banks and insurers are adopting platform patterns that separate systems of record from systems of engagement, allowing faster change at the edge while protecting core stability. API first strategies, reusable data products, and secure model orchestration are becoming standard practices. The priority is to reduce operational friction while enabling faster product rollout, better personalization, and more consistent risk control.
Even with higher budgets, leadership teams are pressing for visible payback. Cost controls are being embedded into delivery through finops practices, automated testing, and infrastructure as code. Programs are sequenced to deliver incremental value, with milestones that unlock further funding. Where possible, firms are reusing patterns and components across business lines to avoid duplicative spend. At the same time, change management and workforce adoption are recognized as critical. Training, transparent communications, and clear operating procedures are essential to realize the benefits from AI, automation, and new platforms.
The year ahead will test how effectively institutions align strategy, technology, and execution. The direction of travel is consistent across segments. Build data foundations that enable AI safely. Modernize core platforms with clear business cases. Focus on client impact and operational resilience. Measure outcomes and adjust quickly. Celent analysts will share deeper sector level insights in a series of free to attend webinars covering retail banking, corporate banking, capital markets, insurance, risk and compliance, and wealth management, alongside in depth reports available to research clients.
Tom Scales notes, It is great to see life and annuity insurers investing and catching up. Cubillas Ding emphasizes that AI and technology enablement are vital to protect profitability and sustain relevance, even as firms pursue scale. Gareth Lodge highlights the reality that innovation adds ongoing obligations as well as opportunity, which makes prioritization more important than ever. Together these viewpoints reflect a practical path forward. Invest with purpose, modernize with discipline, and deliver value that clients and stakeholders can see.
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