Tech spend, AI fuel JP Morgan’s fight against Big Tech giants

JP Morgan’s status as the largest tech spender in banking was “sort of mandatory,” said CFO Jeremy Barnum, who spoke during the bank’s Q3 earnings call on Friday. 

“We’re a big and very technology-centered business, and the world is competitive, and everything’s changing,” Barnum said. “Younger generations have different expectations, and we have to be nimble and be on the front foot—otherwise we risk getting severely disrupted.”

Earlier this year, JP Morgan began experimenting with using quantum computing for deep hedging. The bank’s technology team comprises more than 50,000 employees, and has been working on financial services applications using emerging technologies technology for years, investing more than $12 billion annually in them on average. This time last year, WatersTechnology reported that JP Morgan had joined forces with Goldman Sachs to explore ways of accessing market data in the cloud.

At JP Morgan’s investor day in May of this year, chief information officer Lori Beer said the bank’s tech spend at the end of 2023 is expected to be $1 billion higher than at the same point in 2022, ticking up from $14.3 billion to $15.3 billion.

CEO Jamie Dimon said on the earnings call that JP Morgan’s high tech spend was a necessity, in part, due to business competition coming from Big Tech firms that are rapidly becoming major fintech providers.

“The competition when we look at it, is Wells [Fargo] … it’s Marcus [by Goldman Sachs], it’s Apple, it’s Chime, it’s Dave. … It’s Stripe in payments,” Dimon said. “We want to be very good and very competitive.”

Dimon said some of JP Morgan’s tech spend was on vital services—instead of innovative ones—such as cybersecurity, datacenter resiliency, and meeting regulatory requirements.

Along with other financial institutions, JP Morgan has also been investing a lot of resources into artificial intelligence. In a letter to shareholders from April of last year, Dimon said the bank had more than 300 AI-related use cases currently in production across risk, prospecting, marketing experience and fraud prevention. In the same letter, he also stated that JP Morgan had been ranked first on the Evident AI Index, a public benchmark that rates major banks on their AI maturity.

“AI is an extraordinarily good tool to use. The management teams are getting better and better at saying, ‘How can we use the data to do a better job to reduce hours and serve clients better?’” Dimon said on the earnings call.

As JP Morgan plans to continue its high tech spend in 2024, Dimon maintains that the disruption risk AI presents is worth it. “Does it create an opportunity for disruptors to come in? Yeah, of course, that’s always been true with technology, and we’ll be quite good at it,” he said.