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The CEO at US investment bank JP Morgan Chase told shareholders that the bank’s $9.5bn investments in technology, including financial technology (fintech), during 2016 are part of the reason for the company’s success.
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Out of the total spending, around $6.5bn was spent on supporting existing IT, while the remaining $3bn went on new initiatives, including around $600m on small IT companies in the sector, known as fintechs.
“One of the reasons we’re performing well as a company is because we never stopped investing in technology – this should never change,” said CEO Jamie Dimon in a letter to shareholders.
He said reducing errors and becoming more efficient, as well as offering better customer services that are faster and cheaper, are the main reasons why the bank spends so heavily on IT in areas such as digital services, big data and artificial intelligence.
The bank is close to releasing a range of new technology-driven services, including end-to-end digital banking where customers can open an account and carry out most applications on a smartphone, as well as electronic trading and automated investment advice.
“We are currently developing some exciting new products and services, which we will be adding to our suite and rolling out later this year,” said Dimon.
The company’s $600m investments in fintech include spending related to its Financial Solutions Lab which, with the Center for Financial Services Innovation, supports fintechs developing products for consumers to manage their finances.
So far, 18 fintechs have been supported by the lab. These include Digit, which is an automated savings tool that identifies small amounts of money that can be moved into savings based on spending and income.
The bank has also opened up its application programming interfaces (APIs) to third parties through its Developer Services API store. “By providing direct interfaces with our applications – fully controlled, of course – we are enabling entrepreneurs, partners, fintech companies and clients to build new products or services dedicated to specific needs,” said Dimon.
Read more about fintech
- Investment in UK fintech went down in 2016 but is still ahead of 2014 numbers, according to figures from FinTech Global.
- Banks are prepared to work closely with IT startups to help them remain competitive as the threat from technology companies and financial services startups becomes significant.
- The Nordic region is a hotspot for IT startups and Sweden is a country punching above its weight in financial technology.
JP Morgan Chase is not alone in working with fintechs. According to recent research from banking association Efma and Infosys Finacle, 77% of 158 global banks questioned view technology companies, startups, retailers and telecom companies as significant threats.
Fintech is receiving heavy investment globally, with figures released in February 2017 by fintech trade body Innovate Finance revealing that venture capitalist investment in the fintech sector increased by around 11% to reach $17.4bn in 2016. Innovate Finance also found that China ($7.7bn) and the US ($6.2bn) are way out ahead in terms of investments in fintech.