JP Morgan’s legal team is off a heavy workload after a software developed by the company is functioning at a Brobdingnagian speed than the employers.
Named, COIN, for Contract Intelligence, the program does the critical calculations to conclude the consent on agreements for commercial loans. As reported by Bloomberg, before the software was introduced, 360,000 hours of work each year were consumed to review documents which can now be done in seconds.
COIN, which was the result of positive intuited investments into machine learning has low risk compared to human errors. The expenses are also deflated comparatively. The push to automate mundane tasks and create new tools for bankers and clients — a growing part of the firm’s $9.6 billion technology budget — is a core theme as the company hosts its annual investor day on Tuesday.
Behind the strategy, overseen by Chief Operating Officer Matt Zames and Chief Information Officer Dana Deasy, is an undercurrent of anxiety: Though JPMorgan emerged from the financial crisis as one of few big winners, its dominance is at risk unless it aggressively pursues new technologies, according to interviews with a half-dozen bank executives. “Matt said, ‘Remember one thing above all else: We absolutely need to be the leaders in technology across financial services,’” Deasy said last week in an interview. “Everything we’ve done from that day forward stems from that meeting.”
After visiting companies including Apple Inc. and Facebook Inc. three years ago to understand how their developers worked, the bank set out to create its own computing cloud called Gaia that went online last year. Machine learning and big-data efforts now reside on the private platform, which effectively has a limitless capacity to support their thirst for processing power. The system already is helping the bank automate some coding activities and making its 20,000 developers more productive, saving money, Zames said. When needed, the firm can also tap into outside cloud services from Amazon.com Inc., Microsoft Corp., and International Business Machines Corp.
JPMorgan will make some of its cloud-backed technology available to institutional clients later this year, allowing firms like BlackRock Inc. to access balances, research, and trading tools. The move, which lets clients bypass salespeople and support staff for routine information, is similar to one Goldman Sachs Group Inc. announced in 2015.
We’re starting to see the real fruits of our labor. This is not pie-in-the-sky stuff.
– Matt Zames
JPMorgan’s total technology budget for this year amounts to 9 percent of its projected revenue — double the industry average, according to Morgan Stanley analyst Betsy Graseck. The dollar figure has inched higher as JPMorgan bolsters cyber defenses after a 2014 data breach, which exposed the information of 83 million customers. “We have invested heavily in technology and marketing — and we are seeing strong returns,” JPMorgan said in a presentation Tuesday ahead of its investor day, noting that technology spending in its consumer bank totaled about $1 billion over the past two years.
As for COIN, the program has helped JPMorgan cut down on loan-servicing mistakes, most of which stemmed from human error in interpreting 12,000 new wholesale contracts per year, according to its designers. JPMorgan is scouring for more ways to deploy the technology, which learns by ingesting data to identify patterns and relationships. The bank plans to use it for other types of complex legal filings like credit-default swaps and custody agreements. Someday, the firm may use it to help interpret regulations and analyze corporate communications.
Another program called X-Connect, which went into use in January, examines e-mails to help employees find colleagues who have the closest relationships with potential prospects and can arrange introductions. For simpler tasks, the bank has created bots to perform functions like granting access to software systems and responding to IT requests, such as resetting an employee’s password, Zames said. Bots are expected to handle 1.7 million access requests this year, doing the work of 140 people.
To help spur internal disruption, the company keeps tabs on 2,000 technology ventures, using about 100 in pilot programs that will eventually join the firm’s growing ecosystem of partners. For instance, the bank’s machine-learning software was built with Cloudera Inc., a software firm that JPMorgan first encountered in 2009.