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JPMorgan vows $1B/month effort to get off legacy stack

Bank admits its "Chase UK" fintech may lose money for a long time...

JPMorgan CEO Jamie Dimon said the bank is spending up to $12 billion on technology this year – telling analysts on a strikingly frank earnings call that “if we don’t… we’ll be clunky and inefficient and hamstrung in the future when we’re trying to compete”. That will include getting card payments off mainframes, investing in multicloud-powered applications running as microservices and billions on brand new data centres, he added on the call.

“I’ve read about the competition”, he said. “There's global competition, there's nonbank competitions, direct fiber lending competition… there's fintech competition, there's PayPal competition. There's a lot of competition, and we intend to win and sometimes”, he added, “you need to spend a few bucks.”

The comments came as the bank reported revenues for Q4 of $29.2 billion, with net income of $10.4 billion, down 14% on higher expenses, including technology expenses. On a call in which Dimon was bullish on the need to spend more, including on rewarding staff (“if that squeezes margin a little bit for shareholders, so be it”) he added that if “if I had to spend $2 billion more to get to the cloud tomorrow, I’d do it.”

CFO Jeffery Barnum added: "We are in for a couple of years of sub-target returns. Despite this, we are going to continue to invest, and we're not going to let temporary headwinds distract us from critical strategic ambitions. And so, looking at adjusted expenses, we expect roughly $77 billion in 2022."

JPMorgan technology spend: 50/50 "run" vs "change"

JPMorgan technology spend
A slide from the JPMC Q4 earnings presentation.

Pressed forcefully by analysts for more detail on that technology spending, Dimon said: "[It's] 50-50 run the bank, change the bank. Within the change agenda, half again is modernization-type stuff as opposed to features and products.

"[One is example is that] card runs on mainframe. We have one of the most efficient, most economic [platforms that underpins], 60 million accounts, etc. But it's a mainframe system in the old data center.

"When it gets modernized, to the cloud, the cost savings by running that and marginalizing it will be $30 million or $40 million a year. That isn't the reason we're doing it.

See also: JPMorgan turns to two British fintechs for new core retail banking engines in US and UK

"The reason we're doing it, is once you get that to the cloud that the database that it uses to feed its risk, marketing, fraud, real-time offers and stuff like that becomes accessible to machine learning" he said, adding: "We're running a whole bunch of major programs, which I don't think we disclosed, on AWS. And we're working with Google and Microsoft because we want to have multiple cloud capabilities. This year, roughly 30%, 40%, 50% of all our apps and all data will be moving to [the cloud].

"This stuff is absolutely totally valuable... the power of the cloud and big data on risk, fraud, marketing, capabilities, offers, customer satisfaction, do with errors and complaints, prospecting, it's extraordinary."The call came after a year in which JPMorgan entered the UK retail banking market, launching its Chase UK digital-only bank. The proposition has drawn a mixed reception (its Play Store reviews are one way to note that) and been criticised for not supporting open banking, a lack of features and too regular bugs. Dimon added on the call: [When it comes to] Chase UK, we've been very, very clear that costs us money.

"And a lot of you want payback tomorrow and stuff like that. We'll not disclose those numbers, but we are there for the long run. We're going to be adding products and services and countries for the rest of our lives, OK? So I doubt, over the long run, we'll fail. We may not become the best digital bank in the UK or somewhere in the short run..."

See also The Stack's interview with JPMorgan CIO Lori Beer