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Automation and Corporate Agility: What We Can Learn From JPMorgan Chase

Steve Gilde July 17, 2024
jpm-chase-case
Automation and Corporate Agility: What We Can Learn From JPMorgan Chase
9:18

 In one of our recent blogs, Why Testing is Critical for the Future Success of Digital Payments, we quoted a Visa press release that highlighted the rapid evolution of the payment industry toward a completely digital future. 

The press release read: “The way people pay and get paid has changed more in the past five years than in the last 50.”

This change presents huge challenges for many banks and financial services companies that are desperately trying to keep pace with rapidly evolving consumer behavior, aggressive fintech disruptors, increasingly sophisticated cybercriminals, as well as growing legal and regulatory burdens – even as they struggle to keep critically important digital transformation efforts on track.

Of course, where some organizations see only the challenges that come with rapid change, others see opportunity. In case you have not been paying attention recently, JPMorgan Chase has consistently managed to navigate its way through rough waters to become the largest bank in the USA.

Indeed, JPMC has mastered the art of digital transformation to the point that it has become the Great White Shark of the banking industry, leading its peers in several significant metrics, including the ones that matter most:

  •   Number 1 in Assets

  •   Number 1 in Consumer Deposits

  •   Number 1 in Credit Cards Issued

  •   Number 1 in Credit Card Receivables

  •   Number 1 in Annual Revenues

  •   Number 1 in Net Income

  •   Number 1 in Market Capitalization

  •   Number 1 in Annual IT Spending

 

Spend Money to Make Money

It should come as no surprise that IT spending is included in the list above. It is precisely their surgical approach to using technology that sets the organization apart. 

According to their most recent investor day presentation, JPMC management has been laser-focused on “investing in modern technology, infrastructure, and practices that leverage automation and data to optimize operations, increase productivity and business insights.”

In a recent interview with TechCrunch, Lori Beer, the Global CIO at JPMorgan Chase said: “We continue to teach our teams to understand, whether it’s on-prem or in the cloud, how to be accountable for the cost, the security, the scalability and the efficiency of how we build software and leverage infrastructure.

While JPMC has indeed leveraged its technology spending to steadily grow and dominate the US banking industry, they are not the only example of an organization using this strategy. Amazon, easily the largest e-commerce company, spends significantly more on IT than its peers, and Walmart, the largest US retailer, also outspends all other brick-and-mortar merchants by a wide margin.

 

No Secrets

The good news here is that while not every bank can afford to spend $17 billion on IT every year like JPMC, investing wisely in technology to make your organization more efficient, more agile, and better prepared to deal with rapid change is no secret at all.

In fact, earlier in 2024, Celent published the results of a global survey that showed 57% of the responding banks had already highlighted the need for creating greater organizational speed, efficiency, and agility as a top three strategic priority, specifically citing a growing focus on automation.

It is unfortunate that, despite this senior-level awareness, the majority of digital transformation efforts will fail. McKinsey research indicates that “only 30 percent of banks that have undergone a digital transformation report successfully implementing their digital strategy”. 

Reasons for the large number of failed initiatives include an overreliance on legacy systems, too much technical debt, protection of technology siloes, and the inability to effectively manage competing priorities. The McKinsey research did note that “technology-focused companies typically fare better.”

 

“Only the Paranoid Survive.”

- Andy Grove

 

 

Paranoia = Preparation: Why Testing Automation is Critical for Digital Transformation 

Industry analyst Mark Mayo, a Managing Director at Wells Fargo Securities, says that JPMC CEO Jamie Dimon has a “healthy paranoia” that helps the global banking giant stay agile enough to take advantage of the best opportunities while maintaining a constant state of readiness in preparation to deal with the next “black swan” event.

Mayo further states: “...they’re trying to be the preeminent digital bank 2.0, which is the next version of banking, and JPMorgan is at the forefront of being that digital leader.” Chase CIO Beer says “…at any point in time, we probably have like 200 POCs going on. We are continuing to test and learn so that we are in a position to do best in breed, whether it’s cyber technology or something else… the company looks for any edge it can get in terms of services provided and efficiencies it can gain.”

Granted, not every bank or financial services company is ready to embark on a technology-led transformation and modernization journey like JPM Chase. However, the meter is running and the time for action is now. 

Every payment industry participate – every issuer, acquirer, network, processor, gateway, PAYFAC, retailer, and fleet owner should take the steps they can to improve efficiency, agility, and flexibility.

For many organizations, the first step can be as straightforward as introducing basic automation into your payment testing processes. It is no longer acceptable to defend a regression testing cycle that takes six months by saying that’s “the way we’ve always done things”. 

Simply automating the most common testing scenarios can reduce the six-month cycle to a matter of days, or even hours.

Analysis by automation consultancy firm Test Monitor reveals that test automation improves testing process times by 40% – 70%. Research by Capgemini indicates that automation can deliver a 60% reduction in testing time and cost savings of up to 30%.

 

automated-testing

 

 

How Testing Automation Helps Your Digital Transformation Efforts 

Testing automation will help your digital transformation efforts by delivering a number of key benefits, such as:

  1. Speed and Efficiency

In the fast-paced world of payments, time is money. Automation helps minimize the need for manual testing, speeding up projects and delivery cycles significantly.

  1. Improved Accuracy and Reliability

Automation significantly reduces the chances of human error during testing. Automation ensures that each test is performed consistently and accurately. Testing more transactions with fewer errors = doing "more with less".

  1. Expanded Testing Coverage

Testing all of the possible use cases in your payment system manually is literally impossible. Aggressive use of automation will enable you to continually expand your test coverage and run more tests with less effort.

  1. Faster Time-to-Market for New Products and Services

Since automated testing increases efficiency, expands test coverage, and improves accuracy your teams will be able to complete more projects - including the development of innovative new products and services - on time and on budget.

  1. Flexibility and Scalability

Aggressive use of testing automation provides both the flexibility and scalability organizations need to quickly respond and adapt to changing corporate priorities, new business opportunities, and evolving consumer behavior.

 

The time for procrastination is over

“While the pace of change in all forms of payments continues to accelerate, the systems that process them are not known for their pace of change. The complexity of moving and the cost and risk of doing so mean that while many recognize the need for change, it doesn’t happen as quickly as we’d like. Consequently, recently the industry has elevated its talking about the critical need for payments modernization. Yet those banks that have yet to modernize are not just falling behind but are also putting, at best, their competitiveness at risk and, at worst, their ability to operate. The time for procrastination is over.”

- Celent

 

Even as banks and other financial services providers continue their digital transformation efforts, the payment industry continues its dynamic, disruptive, and sometimes difficult evolution into the future. In this context, the importance of having a comprehensive payment testing strategy that focuses on automation cannot be overemphasized.

Interested in learning more about how testing automation can help your organization modernize its payment testing operation and facilitate a successful digital transformation? Reach out to Paragon today. Our team of industry experts are here to help.

 

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