Technology Companies? What Big Banks Spend & Say About Tech

This is by no means a comprehensive and complete technology overview of banks in 2018, but a sample of some banks to give you an idea of what banks say about and spend on tech in 2018. The main driver for this post was a recent article about JPMorgan requiring the new recruits to complete coding lessons. Are banks really transforming into technology companies? Let’s jump straight into the details…

Why are Banks Spending so much on Technology?

Some banks such as Goldman Sachs and JPMorgan are now declaring that they are technology companies with a banking license, and all banks are spending crazy amounts on technology. Here’s why, taken from PwC report – Financial services technology 2020 and beyond: Embracing disruption:

  • The need to update the current IT operating model to be ready for the new normal
  • Reducing costs by simplifying/replacing legacy systems
  • Creating technology capabilities that enable banks to become more knowledgeable about their customers
  • Preparing an architecture that enables “connect to anything, anywhere”
  • Understanding and building systems to combat the multiple cyber-security threats
  • Ensuring access to the necessary talent and skills that will ensure success in the future

Deloitte indicate their drivers for investment in tech and their outlook for banking in general:

  • The need to focus on the customer
  • Regulation
  • Managing Technology (legacy, new and obsolescence) within the organisation
  • Ensuring cyber-threat readiness
  • The Fintech and Big Tech threats
  • Reconsidering the workforce

Source - Deloitte: 2018 Banking Industry Outlook

“Banks are Technology Companies with a Banking License” – Many Banks

So many banking chief’s and heads have stated this:

  • Goldman Sachs – “We are a technology firm. We are a platform” – Lloyd Blankfein  (CEO)
  • ING – ‘We want to be a tech company with a banking license’ – Ralph Hamers (CEO)
  • Citi – “We see ourselves as a technology company with a banking license” – Michael Corbat (CEO)
  • DNB – “Technology company with a banking licence” Halvor Lande
  • BBVA –
    • “If you want to be a leading bank, you have to be a technlogy company” – Francisco González (CEO)
    • “We have to transform the bank into a digital company as soon as we can” – Francisco González (CEO)
  • JPMorgan – “We are a technology company” Marianne Lake (CFO)
  • Deutsche Bank – “This mindset is also necessary if we want to see ourselves increasingly as a technology company” – John Cryan (CEO 2016)
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Put Your Money Where Your Mouth is – Bank Technology Spend in 2018:

The tech budget is phenomenal! It is set to increase year by year, from $261 billion in 2018 to $296 billion in 2021 (Source: JPM, big banks spend billions on tech but innovation lags).

  • JPMorgan –  $10.8 billion a year (Ref: Reuters)
  • Bank of America spend – $16 billion
  • Citigroup – $8 billion (Ref: Finextra)
  • HSBC – $15-17 billion between 2018 and 2020 (Ref: HSBC Strategy Update)
  • Morgan Stanley – $4 billion (Ref: CIO Dive)
    • Maintain the ship or invest in the future – CEO James Gorman
  • Lloyds Banking Group – £3 billion (Ref: The Register)
  • Royal Bank of Canada – $3 billion
    • Interestingly, the RBC chief asked the question “The question every CEO should ask is, what’s Jamie [Dimon, JPMorgan’s chief] doing with the extra $7bn” (Ref: Financial Times)

Overall the following summary by Celent highlights the It spend across financial services from 2018 to 2021:

Source: Celent – Global Tech Spending Forecast: Banking Edition, 2018

References:

 

 

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