How is the financial services industry harnessing advanced technologies to create new solutions to improve internal operations and meet evolving client needs?
That question was posed to JP Morgan’s Corporate & Investment Bank’s Chief Administrative Officer Sanoke Viswanathan, during a fire side chat with DTCC President & CEO Mike Bodson at the 2018 DTCC European Client Forum.
Viswanathan and Bodson swapped insights and discussed the challenges of integrating new technologies and fintech spending into current operations and budget, and highlighted the technology partnerships and talent-building programs.
Learning From Others
Asked to describe how JPM is building its fintech capabilities, Viswanathan pointed to the company’s three-year-old partnership program with technology accelerators. Every year, JPM vets hundreds of fintech providers and to date has forged successful arrangements with some 20 of them.
“We have a lot of problems to solve both for ourselves and for our clients, and we’ve found that fintechs can help us with very strong partnerships to build enterprise solutions,” Viswanathan said.
Most successful fintech solutions have a regulatory angle, he observed. Pointing to Chinese firms Alipay and Tencent, Viswanathan noted additional elements of success: “Make the micro interaction with customers as seamless and easy as possible; in return they will be willing to pay fees. . . But obviously this is not a play for everyone, because you need a lot of scale and a reasonable investment horizon.”
Viswanahan also advised investing in platforms, since “without platforms, you don’t get scale and agility.”
Yet the proliferation of platforms leads to fragmentation and impedes interoperability, Bodson noted. JPM’s response to this risk, Viswanathan explained, has been to create incentives for its programmers to reuse code and functionality developed elsewhere, to make their software easily accessible, and to have the right documentation and share it internally.
Reshaping Business Models
Bodson noted that JPM has been willing to disrupt existing business models, singling out the firm’s healthcare collaboration with Amazon and Berkshire Hathaway as well as its new commission-free brokerage offering.
With the Amazon-Berkshire partnership, “we’re trying to solve what we all feel is a horrible situation in terms of the cost to deliver good health care to the average consumer,” said Viswanathan. Together the three entities provide a large consumer base across which data can be shared and healthy behaviors incentivized, with the goal of delivering health care at a lower cost.
The undertaking “requires a bit of an attacker mindset,” he said, “where we have to be willing to challenge why things have to be done the current way.”
Similarly, You Invest, the zero-commission ETF and stock trading service offered to existing Chase customers alongside JPM’s traditional wealth management business, was designed to solve for client needs. “We’ve never had a competitive brokerage offering and our thought is consumers deserve something better” than what other firms now provide, Viswanathan said.
Transitioning to the Future
Bodson and Viswanathan’s conversation ranged across other issues, including how fintech is likely to evolve in financial services. Rather than a decade-long, industry-wide and expensive transition from the existing to a new infrastructure, Viswanathan foresees one of two paths forward. Either one or two very significant firms committed to new technologies will drive the transition, thereby enabling other firms to jump onto the new platform at the end of the process, or solution development will be modular, with a group of firms solving one thing at a time.
Bodson and Viswanathan agreed on the magnitude of the challenges surrounding this transition. “How are you going to get from here to there,” Bodson asked, given the bespoke nature of every firm’s legacy technology and the eventual need to retire old programming languages like Cobol and Fortran.
Using new technology tools to abstract key information can help in retiring legacy platforms, Viswanathan said, but even more important will be creating interoperability between the old and new generations of technology.
Regarding the future of blockchain, Viswanathan said it has passed from the “hype phase” to the “productionization” phase where actual applications will be built. The re-platforming of DTCC’s Trade Information Warehouse (TIW) to digital ledger technology will be one of these first applications, he noted.
Of course, without a capable workforce, firms will not be able to sustain future fintech initiatives and investments. JPM has responded to the supply/demand gap in technology talent with a program known as Tech Connect. It puts new hires who lack computer science training through a boot camp to learn coding, data analytics and other relevant skills. In terms of work performance, JPM has found almost no difference between people with four-year computer science degrees and Tech Connect participants. “It’s super-inspiring,” said Viswanathan.