Major banks in the United States are increasing tech investment for added efficiencies and frictionless digital experiences — which have become the consumer’s expectation since the pandemic.
There is always a struggle for C-level executives, especially chief financial officers, to decide how to spend money to streamline operations while improving customer experiences and driving customer retention, Manish Gupta, founder and chief executive of AI-driven workflow platform Corridor Platforms, told Bank Automation News.
Banks are in a constant cycle of improvement led by customer expectations and what changes the bank can make to its technological operations, Gupta said.
“It always takes time and costs to figure [transformation] out, and the cycle ramped up so quickly because of COVID,” Gupta said. “You can learn from what other banks have done or you can learn and take help from providers who could give you a leapfrog or a step function.”
According to first-quarter earnings reports, Bank of America, HSBC, PNC and Wells Fargo increased their investment in technology to improve customer experience as consumers become more digital.
Higher tech spend for CX
The $557 billion PNC stated in its Q1 earnings report that it aims to use technology to provide a superior banking experience, deepen relationships and expand into new geographies.
“We’re continuing to invest heavily in our franchise to drive growth and gain share, particularly in our retail banking technology platform or payments businesses and our expansion markets,” CEO Bill Demchak said during the April 16 earnings call.
Wells Fargo is increasing investment in talent, technology and infrastructure to provide a better digital experience to customers on its online banking channels as well as in-branch interactions, CEO Charlie Scharf said during the bank’s Q1 earnings call on April 12.
Similarly, Bank of America aims to increase investments in specific digital tools like its AI-driven chatbot Erica to improve its capabilities, as the tool continues to see increased traction among users, Jorge Camargo, managing direct of mobile app, online banking and Erica AI at the $3.2 trillion bank, previously told BAN.
Tech drives cost savings
While many banks are using technology for better customer experience, some are using it to manage costs.
Fifth Third Bank also is looking to control costs through technology and automation.
“Expenses are well controlled … driven by savings realized through process automation and our focus on value streams,” CEO Tim Spence said during the bank’s first-quarter earnings call on April 19.
The bank aims to increase its technology investment in 2024 by “mid-single digits” to drive operational costs down, Spence said.
As banks look to make their operations streamlined and cost-efficient, it is reflected in their efficiency ratio.
Truist CEO William Rogers said during its Q1 earnings on April 22, “We continue to see improvements in productivity to investments in technology.”
Citi similarly is investing in technology and automation to make streamline operations
“We’ve made steady progress as we have retired multiple legacy platforms, streamlined end-to-end processes and strengthened our risk and control environment,” CEO Jane Fraser said during the bank’s Q1 earnings call on April 12.
The Federal Financial Institutions Examination Council’s website calculates efficiency ratio by the bank’s spend as a percentage of how much revenue was brought in. A lower efficiency ratio shows that a bank’s operations are becoming more streamlined and cost effective.
