editions

JPMorgan realized that it could prevent its IT department from being a “bottleneck” to innovation by pairing rigorous technology standards with independence for product teams. 

Legacy financial institutions are under enormous pressure to keep up with innovative fintechs – and it requires them to rethink how they structure and run their businesses.  

For JPMorgan, that means relying on a spirit of “controlled autonomy” for its development, where teams are structured around products and given freedom to build, experiment, and launch features independently, so long as their technology adheres to a set of centralized standards, according to head of technology for Chase Digital Banking, Roman Eisenberg, who spoke at Tearsheet’s recent banking conference.  

With “controlled autonomy,” teams don’t have to “wait for my team in digital technology to do things for them,” Eisenberg said. “They can do that work themselves.” By eliminating its IT “bottleneck” in favor of technological standards that involve testing and compliance protocols, the bank tends to roll out new or updated features every two weeks, he added.  

As another technology exec at the bank recently put it: “There’s huge value in doing things incrementally.” JPMorgan has previously described its product leaders as “mini-CEOs” who operate their respective teams like startups within the bank.  

By helping businesses better manage their corporate cards, HSBC is targeting a key demographic that banks are currently underserving. Partnering with Extend allows it to majorly upgrade its SMB offering with less effort than through internal development.

HSBC just announced a partnership with fintech Extend that will give its US business clients access to virtual cards with payments tools like budgeting, spending limits, and automatic reconciliations that make it easier for them to control spending.  

HSBC’s new capabilities reflect the financial industry’s recent emphasis on competing with fintechs (and each other) by rolling out new tools for SMB clients.  

And Extend says that banks like HSBC choose to partner with it because it allows them to roll out in-demand features, fast: Our “platform is already integrated with major card networks and processors, so our bank partners can quickly innovate and deliver market-ready modern payment experiences to their business customers,” the firm’s cofounder and COO, Guillaume Bouvard, told Insights Distilled.  

Beyond HSBC, American Express, Silicon Valley Bank, BMO, Bank of the West, and Regions all partner with Extend as well. In the last several months, other business-focused bank launches include Wells Fargo unveiling a new digital banking platform, US Bank adding cash flow prediction tools, and Barclays announcing cash advances. 

Web3 has taken a hit thanks to turbulence in the crypto industry and some recent project flops, which creates potential for incumbents to take advantage of available talent, reasonable valuations, and regulatory energy.

Web3 – a new paradigm of decentralization that incorporates technology like blockchains, smart contracts, and digital currencies – promises to make financial services faster, less expensive, and more resilient and transparent.  

But let’s be real, the industry has had a wild year. The turbulence in the cryptocurrency market and some recently failed blockchain projects, like Australia’s blockchain exchange and Europe’s we.trade platform, have validated skeptics.  

But perhaps counter-intuitively, the slew of disappointments makes it a good time to consider your own Web3 plans, according to Bain’s Thomas Olsen. Web3 is well-suited to areas like wholesale cash management, custody and asset servicing, and private capital markets, according to Bain’s research and latest survey, and even though its timeline is uncertain, progress shouldn’t be halted by recent hiccups.  

“From an incumbent perspective, it’s not all negative – these large financial institutions are seeing a window of opportunity,” Olsen told Insights Distilled.  

It’s now more feasible for big banks to hire experts and develop partnerships (or plot acquisitions) with startups at better terms, while regulators have added motivation to move towards solutions. “Hopefully it will accelerate clarity around regulation, increase available talent, adjust valuations, and allow for more of a focus on real-world efficiency gains and improvements, versus speculation,” Olsen added. 

While the amount of emphasis any big financial institution should place on Web3 depends on the potential use cases that suit its business, Olsen said there are several “no regrets” moves that banks can make, like setting a common education foundation at the C-suite and board level and thinking through how to structure experiments.  

Read the rest of the Bain report here. 

Cloud computing has won converts for its promise of cutting down costs, but large financial institutions need to be pragmatic to avoid spiraling expenses, especially as budgets constrict into 2023. 

As purse strings continue to tighten heading into the new year, all major expenses should receive scrutiny, including the cloud. While cloud computing does help big financial institutions reduce costs over on-premise data centers, the pay-as-you-go subscription model for cloud services can also lead to unexpectedly high bills if technology executives aren’t careful.  

For example, IT executives told Gartner that cost control is one of the most frustrating challenges of the cloud, according to a recent Insider feature.  

Here are some of the ways that big financial firms are keeping public cloud expenses in check, according to tech execs that spoke to Insider: 

• Wells Fargo holds daily meetings to review a detailed dashboard that showcases expense trends and identifies anomalies, which helps the team determine if there are workloads that can be paused during off-hours.  
• Capital One uses a tool that automatically moves less-used data into cheaper tiers of storage. It has since decreased its AWS storage costs by 35%. 

For more techniques on minimizing cloud costs, read the rest of the report from Insider. 

Automation is fulfilling its promise of transforming time-consuming, expensive, and labor-intensive processes into seamless and efficient operations.  

This year, automation maintained the spotlight as banks applied it to many different parts of their business.  

For example, understanding customer behavior and rooting out product issues no longer needs to take forever: Customer analytics firm FullStory has “helped clients find anything from millions to tens-of-millions in conversion opportunities, or lost customers through churn, or in costs for engineering and development,” Kirsten Newbold-Knipp told Insights Distilled. Finicity, a financial data aggregation firm owned by Mastercard, increased its funnel conversions by 15% and reduced its ticket resolution time by 80% using FullStory.    

Banks have also focused on using AI-powered digital assistants to beef up their customer service, since they can handle basic queries and give human agents more time to tackle complicated tasks. Many FinServs have leaned on technology partners to launch sophisticated chatbots, faster. For example, Kasisto counts WestPac, JPMorgan Chase, Standard Chartered, and TD as customers, Amazon Lex has hooked Truist, and Personetics powers tools for US Bank, Ally, and Santander. 

Trade finance document review has also been an area ripe for automation: JPMorgan used Cleareye.ai to “massively improve efficiency” and slash the time it takes to review documents from three hours down to ten minutes, while Deutsche Bank partnered with Traydstream, which can drive a ~60% cost reduction over human document processing.  

Finally, KeyBank has turned to fraud-fighting fintech Quavo to both increase its efficiency and reduce its losses. “We anticipate our back-office hand-offs and processes will reduce in half while improving chargeback effectiveness,” a KeyBank spokesperson told Insights Distilled, adding that Quavo’s platform “takes out errors and manual processes, giving us capacity to provide more support to our clients and dispute investigations.”   

Partnering with fast-moving startups helps incumbents upgrade their customer offerings more quickly, as they compete against fintechs and each other.

Big financial firms continued to embrace startups this year to help them hook their customers with useful features or revamped processes.  

For example, HSBC, TD Bank, Barclays, and Standard Chartered are all relying on partnerships to offer unique or improved tools to their business clients: 

• HSBC has slashed the time it takes to approve collateral-based business loans from one to two months to under 48 hours using a new platform powered by Trade Ledger  
• TD Bank is working with DailyPay to let business clients pay out their workers almost as soon as they finish a shift 
• Barclays, which is offering faster cash advances by working with Liberis  
• Standard Chartered, which is providing SMB customers with personalized analytics through a relationship with upSWOT, in a “win-win” situation for both the bank and its clients, an exec told Insights Distilled. 

Consumers are reaping the benefits too:  

• Capital One is partnering with Hopper to build out its travel services for credit card holders  
• UBS is working with Regula to allow people to sign up for new accounts in minutes online, without a video interview 
• NatWest just launched partnerships with three fintechs – Token, Yapily, and Tink (a former Insight Partners’ portfolio company that sold to Visa) – to provide more flexible payments for its customers. 

Leaders need a framework for choosing technology experiments and partners on their quest to “disrupt” themselves – and a gameplan for helping workers find meaning and value in their work. 

We received a wealth of advice from the tech execs who have shaped financial firms’ strategies.  

Former Credit Suisse CIO Radhika Venkatraman built a “well-oiled machine” for scaling innovation across the investment bank by evaluating experiments based on whether they were risky, creative, and scalable. “If your experiment is outlandishly successful, but your output is tantamount to giving birth to a mouse, that’s not an experiment you want to spend your precious money on,” Venkatraman told Insights Distilled. 

Meanwhile, executives from TD Bank and Wells Fargo shared advice for working with fintech partners: They recommend creating quick, snappy proof-of-concepts to vet partnerships from both a technology and a relationship perspective. If you do decide to work together with a startup, you should understand their business continuity plan from the outset. Running through worst-case scenarios is crucial, says Wells Fargo head of digital Michelle Moore: “My legal, risk, and compliance partners are my best friends.”   

Execs from Visa, Capital One, and Goldman Sachs outlined how to build an innovative, motivated workforce by recruiting underrepresented tech talent (and keeping your firm accountable for its progress) while reducing the amount of manual, repetitive work for engineers through automation. You should help workers understand how their efforts impact the firm’s bigger-picture goals: “They need to feel like they’re on the front line of the business,” according to Goldman Sachs’ chief information officer, Marco Argenti.  

Highly regulated financial services firms now have a bevy of software options as they strive to stay compliant. As one exec put it: Technology is “transforming the culture of compliance to be real-time, continuous, and complete.” 

The era of robust RegTech software is upon us.  

One of the hottest areas of interest – communications surveillance software – saw an uptick after lawmakers hammered the likes of JPMorgan, Goldman Sachs, and Bank of America with a combined $2 billion in fines for failing to properly monitor all employee messaging. Platforms like SteelEye give FinServ clients a holistic view so they can “connect the dots,” while firms like LeapXpert have seen “an incredible rise in interest due to the regulatory crackdown,” as have other providers Movius, SteelEye, Symphony, and Nice Actimize.   

Meanwhile, AI-powered software that scans, synthesizes, and provides recommendations for compliance teams has attracted attention, as have platforms that help FinServs stay abreast of know-your-customer regulations. For example, Standard Chartered is using tools from Chekk for real-time risk assessment and anti-money laundering. 

Ultimately, these kinds of tools can help firms understand their risk and compliance posture internally, for their boards and decisions makers, but also externally. For example risk data network Acin, which has buy-in from BNP Paribas, Citi, and Lloyds, has “changed the nature and quality of [firms’] conversations with regulators,” an exec told Insights Distilled. 

DevOps tools for observability and low-code development can help teams understand their tech stacks, troubleshoot, build safer products, and keep costs under control. 

What do developers want? “To simplify their stack and ship code faster,” according to Insight Partners’ managing director Michael Yamnitsky. Correspondingly, this year brought a surge of adoption for DevOps tools that make workers’ lives easier.  

For example, Netherlands-based ABN Amro used IriusRisk’s automation-powered platform to move threat modeling into its initial phase of software development. This “shift left” has helped its engineers save at least 11 months of effort.  

Meanwhile, a consortium of global banks built an electronic-trading platform in record time because of low-code tool Genesis Global, which has raised more than $250 million from the likes of Citi, Bank of America, BNY Mellon, and Insight Partners. “The world is changing, the pace of development is changing, and we’re trying to change with it,” Citi exec Vitaliy Kozak told Insights Distilled, about using Genesis’ platform. 

Finally, FinServs flocked to tools for incident response that help flag IT issues and “toxic workloads” before they cause cascading problems. Mastercard saw an “immediate impact” on its platform’s efficiency and reliability by integrating observability tool Unravel, while Wells Fargo and UBS turned to Insight Partner’s portfolio company BigPanda to increase transparency, reduce downtime, and simplify an otherwise costly incident-management process.

The FedNow network and the Consumer Financial Protection Bureau’s upcoming data-access proposal will usher in faster payments and open banking, which will level the playing field for smaller banks and give customers much more flexibility in switching. This, in turn, will spur institutions to step up their retention efforts.  

This year will bring two important landmarks for the banking industry: The launch of the Federal Reserve’s long-anticipated instant-payment system, FedNow, and proposed regulation to force banks to share data with other institutions when asked by a consumer.  

Both changes could have rippling impacts:  

FedNow is widely seen as poised to give smaller banks and credit unions a way to compete with their larger competitors on instant payments, while the proposed regulation would make it easier for people to “break up with banks that provide bad service,” according to CFPB director Rohit Chopra.  

Ultimately this would reduce the traditional “stickiness” of banks, requiring them to either work harder to keep customers happy or risk losing them. For example, community banks with higher interest rates may suddenly become more attractive to customers that may otherwise not have wanted the hassle of switching institutions or losing access to instant payments.  

Per American Banker’s John Heltman: These “two regulatory innovations — faster payments and open banking — are consequential on their own, but when taken together are greater than the sum of their parts.”