Technology Spending Is Top of Mind as CFOs Wait for Rates to Drop

As the Federal Reserve continues to evaluate when the time will be right to lower interest rates, business leaders are already thinking ahead about the ways in which their spending may change once a rate cut occurs. For many, the logical allocation is clear: invest in technology.

In the Inside the Minds of CFOs survey, PNC found that among 300 surveyed U.S. CFOs, 75% cited technology as the area in which they were likely to increase spending following a drop in interest rates. The result tracks with an ongoing trend over the past few years. When asked how much their company’s investment in technology had changed since 2020, 59% of surveyed CFOs said it had increased 1% to 25%, while 19% of respondents said it had increased between 26% and 50%. Only 2% of CFOs said their technology expenditure had decreased.

The likely upward trend in technology spending may have to do with the constraints in which companies have been operating in a higher-for-longer rate environment. As costs have increased, businesses have become increasingly aware of the importance of realizing efficiencies in order to manage expenses.  

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Growing Importance of Efficiency 

Streamlining processes for purposes of cost savings was a clear priority for many of the surveyed CFOs. Among the participants who had invested in technology in the last 12 months, 65% said spending had gone into cloud computing, with another 57% indicating automation had been the focus.

“It’s not surprising that survey results point to a growing interest in investing in digitization, as many technology platforms are predicated on reducing friction and maximizing available resources. These are areas of focus that have been especially critical in the high-cost environment of the past several years,” said Head of PNC Treasury Management Emma Loftus. “Digital solutions can streamline back-office processes and help companies better manage risk, which ultimately helps reduce costs. It may also help reduce reliance on people, which may be appealing for businesses that are facing difficulty managing increased costs and other challenges involved in attracting employee talent in an ongoing tight labor market.”

Cybersecurity Concerns

Efficiency isn’t the only concern that is front of mind for CFOs when it comes to evaluating technology spending. As the threat of fraud continues to proliferate, businesses are investing in ways to protect against ever more sophisticated attacks. According to the Inside the Minds of CFOs survey, 71% of surveyed CFOs said they had invested in cybersecurity/fraud protection during the last 12 months.

These kinds of protections often involve implementing safeguards to prevent various forms of payment fraud – an area where digitized treasury solutions may play an important role – as well as other forms of software that guard against ransomware attacks, which are on the rise for businesses across all sectors.

Artificial Intelligence (AI)

AI is frequently in the conversation when it comes to technology that may be of growing interest to businesses. However, when polled in the survey, only 52% of CFOs said their companies had invested in AI/machine learning during the last 12 months. The reasons for this may have to do with a combination of more pressing priorities, along with a “wait and see” mentality as the technology continues to develop.

“There is a high level of interest in AI among businesses across all industries and sectors, but the reality is that the technology is still in its early stages. There’s still some uncertainty about how to leverage it, as well as what the return on investment is likely to be,” said Matthew Embacher, managing director of the Technology sector for PNC Corporate Banking.

In the meantime, survey results would indicate that CFOs and businesses are more focused on a spending strategy that prioritizes their most urgent needs – which come down to finding ways to manage expense and maximize available resources.

Survey Methodology

PNC Bank’s Inside the Minds of CFOs survey featured responses from more than 300 CFOs at U.S.-based companies. It was conducted by Bloomberg Media Studios immediately after the Fed meeting on June 12, 2024. The study included CFOs, ages 26+, employed full time as a CFO. Companies spanned 23 industries, with 61% of them having more than 1,000 employees and 31% with revenues of $1 billion or more. About 54% are publicly owned.

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