Are Banks Tech Companies? Going Forward, They'll Have to Be

No one could have envisioned how the whole world would be turned upside down by stay-at-home mandates and physical distancing—I prefer this term, as we are still very much social beings—but credit is due to the state of technology. 

Think about it: If this virus had hit us 10 years ago, life would be a lot harder. Sure, there were communication tools back then, but they were clunky by today’s standards, and expensive. Those systems simply could not have handled an entire workforce working remotely. And the idea of using cloud for an array of needs was anathema to most financial institutions.

So much has changed since videoconferencing company Zoom was launched in 2011. Banks specifically have tried to run from being called the disrupted—a threat many tech startups use against them—to now embracing that disruption, and even helping to incubate those disruptors. 

Proof of this sea change could be heard on many first quarter earnings calls. During Morgan Stanley’s call on April 16, James Gorman, chairman and CEO, said, “We’ve benefited in this period from robust business planning and from years of investment in our technology infrastructure.” 

Katherine Wetmur, the bank’s international CIO, tells WatersTechnology that the BCP strategy Morgan Stanley has in place allowed it to quickly move to a work-from-home scenario for about 90% of its employees. For example, this meant shipping out and setting up around 12,000 devices out to employees’ homes. 

Rob Goldstein, COO and head of BlackRock Solutions, said during the company’s most recent earnings call that BlackRock’s goal is to make Aladdin the common platform across the industry in order to deliver that standardized data.

“What’s amazing is that even in this year 2020, with all of the technology innovation … in the broader world and in our industry, the truth is asset management and the broader industry … do not have a common language that is used across market participants,” he said. “That’s what we’ve been trying to accomplish and that’s been our aspiration with regards to Aladdin. We actually have a strategy that we call Tech 2025, which has a few basic pillars to it, which is about this concept of building and enabling this whole portfolio ecosystem, and having Aladdin be the language of portfolios in terms of that ecosystem.”

Even during the lockdown, the asset manager was still able to onboard clients to its Aladdin platform remotely.

Deutsche Bank, on the other hand, is focusing its attention on automation. It is providing employees with new tools and necessary training so they can automate processes that don’t require manual execution, more independently. 

Stuart Gurr, the bank’s group CIO for Asia-Pacific, says the goal is to better align the operations and software development teams. Since operations teams often are the first to see challenges happening on the ground, they know better which processes can be automated, and which still require manual execution. 

“For example, we [want to] bring these kinds of lower-end automation requirements into that structure, these production engineers into agile teams, and ensure that we get those automation requirements added into the backlog and treated as part of the program of work within the business,” Gurr says. 

Whether for retail banking or servicing the wholesale capital markets, banks, asset managers and wealth managers have had to embrace technologies like cloud, artificial intelligence, and new compliance, surveillance and reporting platforms to meet both client and regulatory demands. I believe this worldwide shutdown will make banks push that tech envelope even further. 

When the financial crisis hit the global capital markets in 2008, it was the tech and ops departments in the middle and back offices that took a beating as banks looked to outsource everything. Today, that type of move will not be so easily made.

No one knows what the “new normal” will look like in the near term, much less five to 10 years out, but spending on technology—and building a workforce that understands and knows how to use new tools—will be vital. While no one could have envisioned the disruption that Covid-19 has wreaked on the capital markets, there will be more disruptions to come, and tech investment will be crucial to surviving what’s to come.