March 21

A perfect storm of conditions could make technology M&A more appealing than ever for big FinServs, who may view it as a way to protect their operations and could benefit from more-attractive terms. 

Experts were already predicting that 2023 would likely be a big year for tech M&A for banks, and the aftershocks of Silicon Valley Bank’s collapse may create even more incentives.  

When SVB’s implosion threatened many software startups that relied on it, FinServ CIOs had to grapple with whether they had backstops for all the providers in their technology supply chains.  

This stressful process could have execs eyeing acquisitions to safeguard the tech that has become integral to their infrastructure, Forrester analyst Stephanie Balaouras told The Wall Street Journal. 

Or, as CIO of Nutanix Wendy Pfeiffer mused: “Are there opportunities for me to maybe invest in a partner and make sure that they’re there for me?”  

Meanwhile, the current economic climate and tough funding environment could lead to better terms for acquisition-hungry banks and insurance firms.   

Eager acquirers should remember, however, that careful due diligence and a specialized approach to retaining talent are crucial to making a purchase successful instead of a flop, as Bain analysts previously told Insights Distilled.  

Neobanks have touted their account-opening ease and digital experiences as factors behind their surge of new clients, underscoring traditional banks’ need to continue revamping their processes. 

Money is moving right now and having a seamless customer experience is a ticket to winning it.

Neobanks and fintechs like Mercury, Meow, NorthOne, and Arc have capitalized on SVB’s failure with a surge of new clients, and experts attribute it to their digital acumen and fast account-opening processes. 

For example, neobanks can open accounts for new clients online in under an hour, while traditional banks may take days. They also have a “great digital-only experience,” as Alloy Labs CEO Jason Henrichs put it to American Banker.  

There’s also their flexibility to launch new promotional campaigns or product strategies. For example, Mercury quickly boosted its FDIC insurance coverage to $3 million last week by splitting up customer funds across a network of different bank partners.  

Money is moving right now and having a seamless customer experience is a ticket to winning it.  

While signs point to the fact that traditional institutions ultimately stand to be the biggest beneficiaries of SVB’s collapse (Bank of America, for example, has reportedly gained $15 billion in recent deposits), they can still learn from their fast-moving counterparts. In short, the need to simplify account openings and improve digital capabilities is more important than ever.  

ChatGPT – the AI-powered tool that can respond to prompts and queries in a human-like way – can help make vast proprietary datasets more accessible: Advisors can use it to access key information, quickly. 

Morgan Stanley Wealth Management is using GPT-4 – the newest version of the buzzy chat tool – to drive efficiency and competitive advantage for its financial advisors.  

The bot will source its information exclusively from MSWM content: The firm trained ChatGPT on about 100,000 pieces of its own proprietary research. Querying it will allow advisors to receive answers in seconds and more easily digest large amounts of data without manually combing through reports.  

This allows them to use Morgan Stanley’s own insights in new, richer ways, free up time, and better serve clients.  

“It will be like having our chief investment strategist, chief global economist, and global equities strategist on call for every financial advisor 24/7,” the head of analytics, data, and innovation, Jeff McMillan, said of the tool.   

The feature essentially gives advisors superpowers that amp up versus minimize their ability to have personal, trusting relationships with their clients.  

Morgan Stanley’s sanctioned use of ChatGPT resembles that of Swedish investment firm EQT, which programmed the chatbot to help its dealmakers more easily benefit from its “Motherbrain” data platform. We expect to see more FinServs proactively rolling out ways for employees to use this tool, though for the time being many big banks have banned work usage of ChatGPT, until it’s properly vetted. 

As the number and diversity of cyberattacks continue to increase, FinServs need to use sophisticated tech tools to outsmart their enemies – including the use of “honeypots” to gather data. 

Mastercard announced the acquisition of Sweden-based cybersecurity firm Baffin Bay Networks on Monday to help its clients fend off cyberattacks.  

Baffin Bay’s threat protection platform uses predictive, AI-based technology to automatically filter and counteract malicious internet traffic, while gathering data about bad actors. As distributed denial of service (DDoS) attacks continue to increase, there’s a greater need than ever for a strong line of defense against breaches.  

“On a technical level, Baffin Bay Networks leverages sophisticated AI modelling to distinguish between good and bad traffic,” a spokesperson told Insights Distilled. “It operates a large network of decoy systems that security teams can use to spot attacks early and gather information on attacker tools, tactics, and procedures (these are called ‘honeypots’).” 

The acquisition aligns with Mastercard’s strategy of offering additional services beyond payment transactions.  

“The solution complements our existing vulnerability diagnostics, equipping customers to take a targeted next step in protecting their cyber environment,” according to Mastercard’s president of cyber and intelligence, Ajay Bhalla. Neither firm disclosed the terms of the deal.  

The announcement closely follows Mastercard’s news that it’s experimenting with ways to use quantum computing to improve its loyalty and rewards program. 

Through continuous monitoring and cost transparency, Liberty Mutual has reduced its annual projected cloud expenses by 20% – and it aims to achieve 25% in 2024.  

Liberty Mutual now has about 70% of its IT assets in the cloud, and has been incredibly deliberate in how it has shifted its workloads.  

“We actually have a rationalization strategy where we’re shutting down 100 to 200 systems a year,” Liberty Mutual CIO Monica Caldas told CIO Dive in a recent webinar. “And we’re keeping that close and monitoring it to make sure that we actually do the stewardship part.”  

That’s necessary to avoid the “tough spot” of just lifting-and-shifting, she said: Cloud computing can get expensive, so CIOs need a well-defined plan to manage costs. Rationalization – the process of determining the best way to migrate or modernize apps in the cloud – has been crucial to the insurance firm’s transformation, she said. 

Cost management starts with cost transparency: For example, Liberty Mutual displays costs in its developer consoles, so teams can directly see how their spending has fluctuated from month to month. (For more cloud cost-mitigation advice from experts, check out this recent edition of Insights Distilled.) 

Saving money on cloud costs can ultimately create a “flywheel effect,” Caldas says, where the budget gets funneled into other innovation projects.