On JPMorgan Chase’s recent conference call, the $3.76 trillion bank announced it plans to increase its annual tech budget to $12 billion, up 26% from what it spent in 2020. According to the tear sheet:

“Analysts found it difficult to accept the sharp increase in technology spending. The increased tech budget drives expected overall spending growth to 8%, which could see the company miss profitability targets this year and perhaps 2023.”

Responding to calls to estimate the return on the bank’s technology investments, CEO Jamie Dimon said:

“A lot of you want a payback tomorrow and things like that. We won’t disclose those numbers, but we’re here for the long haul. We will add products and services and countries for the rest of our lives. So I doubt we will fail in the long run.”

Responses to the news included a tweet from Jill Castilla, CEO of Citizens Bank of Edmond (OK), a $363 million bank, who said:

“If you can’t do LOTS of earth-shatteringly cool stuff with $12 BILLION, you’re in trouble. Our tech budget at @CitizensEdmond is 0.008% of them.”

Ms. Castilla is spot on, but her comment misses two points:

  • Everything is relative. Her bank’s tech budget may be only 0.008% of Chase’s budget, but her bank is 0.010% the size of Chase. Chase’s technology spending accounts for 0.32% of the bank’s assets. Citizens Bank of Edmond’s technology spending – based on Ms Castilla’s tweet – is 0.26% of assets.
  • Citizens Bank of Edmond is already doing a lot of earth-shatteringly cool stuff with the money it invests in technology. For example, during the 2020 pandemic, Citizens Bank of Edmond partnered with Mark Cuban to launch PPP.Bank, a resource for small businesses seeking a waiver on their Paycheck Protection Program loan.

you never give me your money

The challenge for many banks is twofold:

1) They don’t spend enough – relatively speaking. Chase’s technology spending accounts for 0.32% of the bank’s assets. Mid-market financial institutions invest just over half of that — 0.17% of assets — in technology, according to Cornerstone Advisors. Ms. Castilla may feel that her tech budget is tiny, but at 0.26% of assets, Citizens Bank of Edmond’s tech budget is 56% higher than similarly sized banks.