U.S. Banks Make Cool Technology, Realize It Can Be Sold
BY OLIVIA ORAN
Tue Mar 15, 2016 12:25pm EDT
Big Wall Street banks, after spending massive amounts of money and time to get their old, creaking systems in better shape, are now trying to sell technology they’ve developed in-house to other companies.
U.S. banks including Goldman Sachs Group Inc (GS.N), Morgan Stanley (MS.N) and JPMorgan Chase & Co (JPM.N) are spinning out or selling a range of tools that pertain to data security, mobile applications and “systems integration,” the process of flattening layers of aging technology.
So far, the banks are not making much money from these efforts, especially compared to what they have had to spend on technology in recent years. Between upgrades of hardware and software, creating new apps and bolstering cybersecurity defenses, tech is fast becoming one of the industry’s largest expenses.
U.S. banks collectively spent $62.2 billion on technology last year, according to research firm Celent. Selling technology externally recoups only a tiny fraction of that amount. But moving tech from the expense line to the revenue line is an important shift for big banks, which are desperately hunting for new areas of growth as regulations have hemmed in traditional profit engines like trading.
“Banks are looking for other ways to squeeze out profit,” said Jonathan Lehr, a managing director at venture capital firm Work-Bench which invests in business technology startups. “They get more eyes on their homegrown technology and it’s a good opportunity to build their brand with potential recruits.”
Goldman has arguably been the most aggressive developer and seller of its own technology to outside companies, something it has been doing on and off since the dotcom boom of the 1990s. Its chief executive, Lloyd Blankfein, is fond of saying Goldman is more like a technology company than a bank.
Goldman is now hoping to capitalize on the popularity of “bring your own device” policies, wherein employees conduct business on their own mobile phones and tablets, rather than on company-issued devices.