JP Morgan Chase, the largest bank in the U.S., today revealed it will increase by 20% the $12 billion it spends annually on technology, offering a rare glimpse into where it allocates those dollars.

The $3.7 trillion bank has slated about half for investments and what it calls “change the bank spend,” Chief Financial Officer Jeremy Barnum said during today’s Q4 2021 earnings call. That includes mandatory spending on regulatory-related investments, modernization and retirement of technical debt.

The budget also includes other key strategic initiatives to help JPMorgan Chase “face the future,” Barnum said. The bank reported revenue of $29.3 billion and managed revenue of $30.3 billion for Q4.

The transparency is unique, as banks tend to lump technology spend with other areas such as marketing and communications or even office equipment.

Barnum further broke down how JPMorgan spends that $12-plus billion, revealing that it expects to increase its “tech and tech-adjacent” spend — which includes cloud capabilities, data centers, data and analytics and digital consumer experience — by about 20% in 2022.

Modernization for the future includes migration to the cloud, upgrading legacy infrastructure and architecture, and a “data strategy that enables us to extract the value that exists in our proprietary dataset by cleaning it and staging it in the right ways,” Barnum said. The bank is also focused on attracting top talent and the product operating model, he added.

JP Morgan spent $2 billion on new cloud-enabled data centers, some of which are up and running, said CEO Jamie Dimon, adding that the bank works with Amazon Web Services, Microsoft and Google for its cloud capabilities, with 30% to 50% of its apps or data running in the cloud.

“This stuff is absolutely, totally valuable,” Dimon said when asked by analysts about the bank’s technology investment. The cloud empowers the bank to run big data on risk, fraud, marketing capabilities and other business-related needs, he added.

“You’ll see some of that benefit, which is why we’re comfortable that will continue to grow and expand and earn, like I said 17% return on tangible capital,” Dimon said. “I would take that if I could push a button and give you that next 20 years, I would take it.”

The other half of tech spend is devoted to driving innovation with client-facing products, Barnum said.

“We believe it’s critical to identify and resolve customer pain points and improve the user experience and we’re attacking the problem with the combination of building, partnering, buying,” Barnum said.

Specifically, the presentation referenced:

• The September 2021 launch of the cloud-native digital bank Chase UK;
• Onyx, the bank’s blockchain-based trading platform on the wholesale side. Onyx launched in 2020, and the bank is now using it to build out real-time payment capabilities;
• Execute, a full-service macro tasing platform for clients; and
• Chase MyHome, a digitalized mortgage “experience.”

The bank has also acquired or partnered with several companies, including:

• 55ip and OpenInvest acquisitions to build an algorithm-based digital platform within tax-efficient investing and ESG;
• The Nutmeg acquisition, which brought a digital wealth manager to complement the UK retail platform;
• A 75% stake in VW Payments to further develop care payment technology; and
• A partnership with Thought Machine to move the retail bank’s core system to the cloud.

“Taken together, our strategy and investments are critical to ensuring that we can compete with the most innovative players out there, whether we’re the ones pushing the envelope of innovation, or responding quickly to the creativity of our competitors, but doing so at scale,” Barnum said.

Shares of JPMorgan Chase were trading at $157.89 as of market close today, down 6.15% from market open.

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