Technology

Banks have traditionally been big technology spenders. Some of the biggest banks have spent billions of dollars on digital transformation initiatives. The results have been less than stellar. In a recent survey, 75 per cent of investors who were asked, ‘How confident are you that banks’ digital transformation strategies will be effective?’ replied with either ‘skeptical’ or ‘too soon to tell’. On the other hand, these very banks have, on average, spent close to 5 per cent of their revenues on transformation programmes, which amounts to hundreds of millions of dollars.8 It feels like a digital technology trap – lots of investments with little to show by way of outcomes. And, as expected, technology spending varies across banks. While the biggest banks spend around 0.4 per cent of their asset base on technology (that alone is a whopping $11.4bn for JP Morgan Chase), the mid-tier banks (with assets of between $500m and $5b) clock in at 0.22 per cent, or about half the proportion of asset base the big banks put in. Generally speaking, while the big banks are struggling to show results from their tech investments, the smaller banks are, in all likelihood, not spending quite enough.

Suffice it to say that big or small, banks need to think hard and drive the right set of technology priorities to stay ahead in their digital transformation journey. This they must do by pushing on the key building blocks outlined above. And, in my experience, any digital technology strategy must include meaningful investments in three areas: infrastructure modernization (table stakes), enterprise AI, and data.