Like most industries, banks did not have a COVID-19 playbook to open up when the pandemic broke out last year. But despite the tough year, the largest bank in the United States, JP Morgan Chase & Co, fared reasonably well, generating record revenue in 2020.
JP Morgan earned a record $122.9 billion in revenue in 2020, compared to $118.5 billion in 2019.
Jamie Dimon, chairman/CEO of JPMorgan Chase in his annual letters to its shareholders, notes some lessons Nigerian banks can draw a cue from.
‘The basis of our success is our people’
The CEO of JP Morgan says the ultimate basis of the firm’s success is its people. “They are the ones who serve our customers and communities, build the technology, make the strategic decisions, manage the risks, determine our investments and drive innovation.”
He also stressed that the bank’s success and accomplishment are founded on strong commitment to its shareholders.
“Shareholder value can be built only if you maintain a healthy and vibrant company, which means doing a good job taking care of your customers, employees and communities. “
Good decision-making process
“Great management is critical to the long-term success of any large organisation. Strong management is disciplined and rigorous. Facts, analysis, detail … facts, analysis, detail … repeat. You can never do enough, and it does not end. Complex activity requires hard work and no uneducated guesswork,” Dimon wrote.
“If necessary, review the information over and over – often the answer is simply waiting to be found – and if you don’t have to, don’t rush. While intuition matters, and it can be the final deciding factor, intuition is not guessing – it is usually based on years of experience, hard work and practice.”
Examine raw data and focus on real numbers
Dimon in his letter pointed out the need to dig deep into numbers. This implies the need to examine actual raw data and not just calculated numbers.
“Look at market share by customer segment so as not to miss behaviour shifts. Frequently, raw data tell a different story from what management may be saying: Too often, management teams use the facts to justify what they already think or to celebrate what they believe is a great success,” he wrote.
However, he mentioned that being true to these principles would require relentless discipline.
Understand when analysis is necessary and when it impedes change
According to the CEO, although he is fanatical about detail and multi-year analysis, it is important to be cautious about its application.
“Sometimes, a new product or an investment should simply be considered table stakes – meaning there’s no need to do analysis at all.
“Think about banks adding the capability of opening new accounts digitally, for example, or maintaining a strong technology infrastructure and adopting new technologies, like cloud or artificial intelligence (AI). These could be life-or-death decisions for a company, so instead of focusing on net present value, the emphasis should be on getting the work done properly, efficiently and quickly.”
AI, the cloud and digital are transforming how business is done
The CEO further stressed the importance of new technology in the new world. Today all technology is built “cloud enabled,” which means the applications and their associated data can run on the cloud.
The advantage this presents is the immediate ability to access data and associated machine learning with virtually unlimited compute power.
“This availability of data – and banks have a tremendous amount of data – makes data enormously valuable and digitally accessible. All of this work takes time and money, but it’s absolutely essential that we do it,” he wrote. Banks must begin to train its people in machine learning
Fintech and Big Tech are here … big time!
Fintech companies here and around the world are making great strides in building both digital and physical banking products and services.
From loans to payment systems to investing, they have done a great job in developing easy-to-use, intuitive, fast and smart products. We have spoken about this for years, but this competition now is everywhere.
As tough as the competition will be, banks must be well-positioned for the challenge, he said. They must adopt Al and cloud as fast as possible so they can make better use of it to better serve our customers.