Banking structure and regulation was created to support a system that had lots and lots of local community banks. During most of US history, the larger financial institution was disliked and even despised. First, the American banking system has been built on the foundation of the small, “main street” bank. The question is, why hasn’t this “break-out” come about earlier? For example, on October 22, 2018, I wrote “ The Smaller Banks Are Going Out-Of-Business.” I followed this up with another post on the same subject on October 24. Well, I have written a lot about this situation.
And, this is just what BB&T and SunTrust are saying. In the process, they also have added deposits at a faster clip than smaller peers.”Īnd the smaller banks that cannot meet this challenge, they just cannot create the scale without the technology to generate that scale. have invested heavily in developing consumer-facing technology such as artificial intelligence-powered “chatbots” and digital investing apps. “In recent years, big banks such as JPMorgan Chase & Co. That is, one of the original “information technology” industries was the finance industry.Īnd, this is what the big banks are going for. All finance just reduces to numbers, which can easily be reduced to zeros and ones. Banking…and finance… are just about information. See current analysis of Alphabet, for example.īut, another important factor about banking…and finance. And, scale comes to dominate products and markets. This expansion is what we are seeing in the tech giants in the information technology field. By creating platforms constructed out of this intellectual capital, it can build networks that can scale to enormous size, one major reason is that intangibles foundations can be expanded at zero or almost zero marginal cost. Bank of American, meanwhile, disclosed a total technology budget of about $10 billion.Īnd, while we are on the issue of scale, let me just bring in the issue of the “new” Modern Corporation that I have been writing about.Ī major characteristic of the “new” Modern Corporation is that it is built upon intangibles, primarily intellectual capital. BB&T disclosed in November that its technology budget for 2018 was $1.1 billion. “The companies also plan to create an innovation and technology center at the merged entity’s new headquarters in Charlotte, N.C., to drive digital transformation, including the adoption of automation and an improved customer experience online.” They plan to reinvest $1.6 billion in projected cost savings from the merger into technology and innovation.” “The transaction-the biggest bank deal since the financial crisis-will allow the former rivals to develop better technology together than they could on their own. Kristin Broughton also writes in the Wall Street Journal, This is all, I believe that needs to be said at this stage. “The world is changing and we have to change,” BB&T Chief Executive Kelly King said. When the combination is completed, the new bank will be the sixth largest bank in the United States in terms of asset size. In the New York Times we read that while BB&T and SunTrust executives “plan to eliminate lots of jobs” in combining the two organizations, “they would plow the savings into technological innovations that fostered greater competition with the nation’s largest banks.” “Technology was the main impetus for the deal, executives for BB&T and SunTrust said Thursday.” This quote is from the Wall Street Journal.
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