Case Study: JP Morgan's $17 Billion Tech Push

How JP Morgan Stands Out in Tech Investments, What to Expect in 2025 and More Yamini Kalra • November 18, 2024

$17 billion. That's how much JP Morgan dedicated to its technology budget in 2024. It's the highest ever from a financial firm, albeit one that itself is worth more than $600 billion. This budget places JP Morgan at the forefront of tech investment among global financial institutions, ahead of Bank of America's $12 billion budget and Wells Fargo's $4 billion ICT spending.

Reflecting on the investment, large-cap bank analyst Mike Mayo called the company "the NVIDIA of banking." Except that JP Morgan's tech push is much higher than NVIDIA's, which spent over $3 billion in R&D this year.

The bank's $17 billion tech budget is split into two. About half of it keeps its engine running - supporting everything from core IT infrastructure to software licenses - while the rest is earmarked for innovation and modernization. The majority of the budget is spent on platform capabilities including payments, such as the deposit platform, marketing platform and API marketplace. This is followed by channel delivery and enablement, aiming to reach customers with the right product and the right offer in the channel of their choice. A portion of the budget is invested in customer-facing product groups across the lines of business, and then, a smaller but critical component on data, artificial intelligence and machine learning.

Clearly, CIO Lori Beer has her plate full.

Beer is in charge of IT operations that involve a 63,000-person team and a tech budget bigger than the revenue of most companies. "We move $10 trillion a day … So there is a direct correlation to our tech investments, products and services. There's just the normal business growth, and then there's the continued optimization of how we use infrastructure," she said.

Beer's focus on creating a developer-centric culture allows her team to operate with startup-like agility within a highly regulated industry. The budget size gives her room to think beyond quick fixes or incremental upgrades. Instead, she can prioritize large-scale initiatives that will have a lasting impact, such as building a multi-cloud environment that ensures resilience against vendor lock-ins or investing heavily in AI and analytics that redefine client engagement.

Intent on Agility, JP Morgan's Aggressive Cloud Migration Strategy

Tech investments aren't new to the organization. But technology today must be flexible, accessible and agile. As of 2024, 80% of JP Morgan's applications have been moved out of legacy data centers and 90% of its analytical data resides on public cloud platforms. And it doesn't stop there - 70% of its data is in the cloud, but it's not the same as having it be modernized and usable for AI and ML, said CFO Jeremy Barnum. There's work to do there .

President and COO Daniel Pinto said it has been a "big, long journey of modernizing our technology stacks from the layers that interact with our clients to all the deeper layers for processing." "The productivity of the organization today is by far higher than it was several years ago," he said. Artificial intelligence has a tangible role to play in that.

CEO Jamie Dimon said AI will be embedded in every one of the bank's processes, including trading, research, equity hedging and customer service.

AI Becomes a Key Revenue Driver

So far, JP Morgan has assigned a value of $1 to $1.5 billion in AI use cases in the fields of customer personalization, trading, operational efficiency, fraud management and credit decisioning. Almost half of the workforce - including 60,000 developers and 80,000 operations and call center employees - benefit from the technology, Pinto said.

In-house AI-driven applications such as the ChatCFO - an LLM developed specifically for JP Morgan's finance team - automate workflows, provide data-driven insights and generate financial models. "You would have thought Santa had come down the chimney with the finance team," said Mary Callahan Erdoes, CEO of asset and wealth management. It's a system that doesn't get tired, doesn't get grumpy and is always ready to crunch the numbers.

The organization has also developed the LLM Suite - a proprietary LLM that functions similarly to OpenAI's ChatGPT - for nearly 50,000 employees to enhance productivity through tasks such as summarizing documents, generating insights and solving complex analytical challenges. Employees are told to think of it as a research analyst that can offer information, solutions and advice.

Another one of its initiatives, IndexGPT, personalizes investment advice in real time, transforming how clients interact with their portfolios. For a bank that processes over $6 trillion in consumer payments annually, this is more than just add-on advisory services.

The Know Your Client, KYC, process serves as a telling example of AI efficiencies. In 2022, the bank processed 155,000 KYC files with a workforce of 3,000. By next year, that number is expected to rise to 230,000 files - a 50% increase - while requiring 20% fewer employees. This represents a productivity boost of nearly 90%.

Last year, JP Morgan also introduced the Cash Flow Intelligence AI tool that cuts manual work by 90%. On whether AI could eliminate jobs, Dimon said they will "deal with it." "We have a turnover of 20% a year. We love to retrain people, redeploy them, re-educate them, and so I am not worried about it," he told Bloomberg. He's right. Between 2019 and 2023, the organization increased the required training hours for its employees by approximately 500%.

What to Expect in 2025

For the most part, tech modernization is a necessity for organizations looking to stay relevant in a volatile digital landscape.

Like JP Morgan, top banks are bullish on tech outlook in the coming years, as legacy infrastructure offers little to meet the evolving needs of businesses and consumers. More than half of the banking executives, 53%, are concerned or very concerned about their dependency on legacy technology and rising tech debt, and 51% said it's "standing in the way" of their bank's success.

In 2025, banks and financial institutions, including JP Morgan, are expected to shell out more to prioritize tech modernization and retain talent. The sector would be focusing on generative AI pilots and potentially shifting from proprietary models to vendor-supplied options. Accelerating core modernization is key to realizing AI's full potential, but instead of rip-and-replace approaches, banks can leverage incremental upgrades, such as adding service layers that interface legacy systems with new technology via APIs. This approach not only enables real-time processing and third-party integrations but also positions gen AI as a powerful tool for scaling and upgrading core systems without overhauling them entirely.