Retail banks will ease off their cost-cutting initiative and grow IT spend by 3.4% this year, analyst company Ovum has predicted, as they shift their focus to revenue growth and customer satisfaction.

IT spending growth will be slowest in Europe, however, at just 3.3%, compared to 3.4% in the US and 5.1% in Asia.

Mobile banking will be the top IT investment priority, Ovum says, as retail banks attempt to capitalise on features such as mobile payments and location-based services. Global spending on the 'Other Devices' technology category, which includes TV as well as mobile, will grow by 8.2% annually between 2013 and 2017, Ovum forecast.

"The optimistic signs on the economic horizon are driving the shift away from cost-cutting and towards investment strategies within the retail banking sector," said Jaroslaw Knapik, senior analyst of financial services technology at Ovum.

"Whilst regulatory compliance has certainly fuelled a significant amount of the investment predicted in the forecast, it is by no means the sole driver," she said. "The level of investment in digital channels gives a clear indication that banks are fully cognizant of the growing expectations of their customers, as well as the opportunities they present."

In November, consumer empowerment group Ctrl-Shift said retail banks should forge better relationships with its customers by using information-driven services to build customer loyalty.