OBSERVATIONS FROM THE FINTECH SNARK TANK
In JPMorgan Chase’s recent earnings call, the $3.76 trillion (in assets) bank announced it plans to increase its annual technology budget to $12 billion, 26% more than it spent in 2020. According to Tearsheet:
“Analysts had a hard time accepting the big increase in tech spending. The increased tech budget pushes total expected expense growth to 8%, which could cause the firm to miss profitability targets this year and perhaps in 2023.”
Responding to calls for estimates of the return on the bank’s technology investments, CEO Jamie Dimon said:
“A lot of you want payback tomorrow and stuff like that. We’ll not disclose those numbers, but we are there for the long run. We’re going to add products and services and countries for the rest of our lives. So I doubt, over the long run, we’ll fail.”
Dimon might have said that Chase won’t disclose the payback numbers but his new letter to stockholders in the bank’s 2021 annual report provides insights into where the $12 billion technology investment is going—and what he expects to get back from it.
Below are quotes from the letter and the Fintech Snark Tank’s take on them.
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“Some of these investments [in technology] simply must be done to sustain the company’s health. Investments in this bucket help keep the ship in tip-top shape and touch a broad range of workplace needs: regulatory requirements and necessary improvements for cybersecurity, as well as operational resiliency and security. Some things we have done with no direct revenue benefit, rather simply to maintain our competitive position. I call these table stakes—think of digital account opening for consumer and small business accounts.”
Fintech Snark Tank take: As Dimon notes, infrastructure investments often have no direct revenue benefit. More important, however, is that these investments usually don’t have a cost reduction benefit, either.