JPMorgan investors press for more details on tech spending

The news: JPMorgan Chase shareholders have privately told CEO Jamie Dimon and other top executives that they want more information about the bank’s plans for technology spending, per the Financial Times.

• The investors expressed their concerns last month, touching on the banking giant’s overall 30% hike in outlays for new projects. Tech plans make up most of the amount, which is close to $15 billion.
• Investors also sought more information about the rationale for JPMorgan’s UK retail banking presence, which debuted last year and could serve as a sandbox for stateside products.

The case for tech spending: Dimon said in the bank’s Q4 2021 earnings call that its spending—of as much as $12 billion—is a necessary competitive move, per The Stack.

• The CEO warned, “if we don’t… we’ll be clunky and inefficient and hamstrung in the future when we’re trying to compete.”
• Dimon said the changes include investing in new data centers, applications powered by multiple clouds, and migrating credit cards off mainframe computers.
• He explained its IT spending is divided in halves: maintenance and updating. Dimon called the breakdown “50-50 run the bank, change the bank.”
• The bank’s competitors range from banks to fintechs, he said, citing PayPal as an example.
• In a July 2021 interview with The Stack, CIO Lori Beer compared the pace of tech investing with the expenditures, stating, “We always think about how can we go faster, because sometimes speed is as important as cost is.”

On its corporate website, JPMorgan outlines customer-side reasons for its spending:

• Meeting expectations from customers who “have become accustomed to the fast pace of innovation.”
• Investing in machine learning due to people getting used to personalized applications; for example, producing customized investment research for J.P. Morgan Markets users.
• Launching an AI-powered virtual assistant for corporate customers, plus rollout plans for more assistants in the bank’s other segments.

The big takeaway: In the competitive landscape surrounding financial services—now crowded with fintechs, Big Tech, and nonbanking brands making innovative use of tech—JPMorgan’s prioritization of tech updates is necessary for it to add and retain users.

• Nevertheless, it should offer shareholders more details—excluding anything likely to undermine its competitive strategies—to get buy-in for its initiatives.
• The banking giant must better communicate the ROI created through the efficiencies its tech upgrades generate. For example, Dimon cited a savings range from moving credit cards away from mainframes—he could reiterate this measure while providing detailed breakdowns for other moves.
• JPMorgan has an opportunity to disclose more details on its investor day on May 23, 2022.