Banks are trying to upgrade their older, legacy systems in order to keep up with technological and digital advancements costing billions of dollars. But those with no access to that kind of money are getting creative. SunTrust and BB&T are merging in a $66bn deal that will make them the 6thlargest bank in the US based on customer assets. The merger will help them make bigger investments in cyber security, compete on mobile and automate existing systems. BB&T and SunTrust have reportedly factored another $100m on technology. BB&T CEO Kelly King said that changing demands of customer and rise in complex economic realities call for technological developments. Although both banks are allegedly ‘doing fine’ now, their coming together will help both to provide digital platforms and other technological features to their customers.
Other banks like Citibank, Bank of America and J.P. Morgan Chase are also investing into technological upgrades. 20% of the entire budget of Citi is reserved for the same. $10.8bn by J.P. Morgan Chase in 2018 and $16bn by BOA in 2017 had been invested for global technology and operations. Kelly King pointed out how more and more customers are beginning to depend on mobile banking services instead of visiting branches personally. BB&T in 2017 dedicated about $50m for acquiring or investing in emerging digital tech firms. This led to closing of 148 of 7% of BB&T’s branches in 2017 with an additional 150 to be shut down in 2018. Its deal with SunTrust will result in consolidation between the two.
But this comes with pressure like that brought in by financial technology startups, without bank charters, that join federally-insured banks who hold customer deposits on their behalf. SunTrust CEO and Chairman Bill Rogers say that competition is natural and that everyone wants more clients. Amias Gerety says that the pressure to be digitally excellent has now become very intense. He adds that digital transformations in the future might include partnerships with fin-tech firms. Marty Mosby predicts more mergers for thriving of mid-size banks.
The SunTrust and BB&T merger rallied the former’s shares 8% and the latter’s up 3%. Brian Klock said that competition from bigger banks and non-banks is more intense now.