According to the study, 2005 will see banks entering the e-banking platform upgrade cycle as they will look to improve the functionality and usability of Web sites and enhance integration with other channels.

This will see investment in e-banking technology rise from $2.2bn in 2004 to $3bn in 2008, with Italy and Norway set to be the fastest growing markets.

William Conner, manager of the financial services technology sector at Datamonitor and author of the study, says: "The Internet is set to re-emerge as a priority area for technology investments. This reflects e-banking's growing effectiveness as a sales tool and banks' drive to refresh existing platforms."

Datamonitor says the best development strategy would be for banks to move to a component-based architecture that spans the entire distribution channel framework. This will involve re-engineering existing applications for re-use across multiple systems.

The technology focus areas include Web content management solutions to push out tailored, dynamic content for customers and help ensure point of sale compliance; analytical CRM tools to assist in customer profiling; and personalisation technologies to develop a more targeted service for distinct customer groups.

Conner says moving towards a process-centric multi-channel architecture will be the foremost area of technology investment for banks and it will be important for vendors to continue to demonstrate the capability to deliver a single, integrated delivery platform across all channels as well as rich functionality for the Internet channel.

Datamonitor says vendors that fail to offer component-based integration will face a challenging growth outlook, particularly those that only offer Internet-specific solutions. Enabling cross-channel process orchestration as well as basic data integration across channels is emerging as a major vendor selection criterion and this will become even more critical as banks seek to migrate towards service-oriented architectures.

While Italy and Norway will be the fastest growing markets, Datamonitor says the UK will be the largest single e-banking market in 2008, but growth will be slower here as many banks have already made significant investments in refreshing Web banking platforms.

Spend in Benelux, Spain and Switzerland will be driven by "a few innovative banks", such as Bankinter in Spain and ING in the Netherlands, but most of these have already invested in second-generation platforms and e-banking spend is therefore likely to be incremental than transformational.

Growth in France and Germany is predicted to be slower than other countries, due to the continued importance of other channels such as Minitel (France) and an ongoing focus on IT cost control (Germany), which has resulted in little strategic IT spend being allocated for new development initiatives.