Digital Banking

Citigroup Spends Billions On Tech To Keep Competitors At Bay

Citigroup Chief Executive Michael Corbat disclosed Wednesday (May 30) that around 20 percent of the New York national bank’s expenses go for technology — which amounted to greater than $8 billion last year.

The Wall Street Journal, citing comments Corbat made at an investor conference, noted that what Citigroup spent on technology in 2017 surpassed all of the money invested into U.S. tech startups by venture capital firms in the same period.  Citing data from the National Venture Capital Association and Pitchbook, the Wall Street Journal reported that tech startups got a total of $6.5 billion in VC funding.

The amount of spending on the part of Citigroup underscores a move by banks to spend a lot of money on technology to keep FinTech competitors at bay. The paper noted that some of the tech budgets go for maintenance of existing systems, but a large amount is earmarked for new technologies and initiatives.  The report pointed to JPMorgan Chase, which said it will spend $10.8 billion on tech this year. In the past it has said that about a third of the tech budget goes toward new investments. “We’re spending more this year than last year in an effort to spend less next year,” Citigroup’s Corbat said at the Bernstein Strategic Decisions Conference.

Corbat noted that the bank expects its expense ratio to decline to 57 percent from 58 percent during the year and that it expects the decline to increase to a 2 percentage point decline in 2019 and 2020. He noted that since 2013, Citigroup has reduced its branch network in the U.S. by 30 percent and is shifting to offer banking services to new retail customers completely on mobile devices. “As the [new] technology comes on…the analog falls away and you get the cost savings that come as a function of moving to that digital technology,” he said, according to the Wall Street Journal.

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