- Citizens Bank spends roughly $440 million annually on tech, a fraction compared to competitors.
- But CEO Bruce Van Saun said the bank has been able to plow efficiency gains back into tech spending.
- The bank has partnered with AWS, and hired 400 engineers over the past three years.
When Citizens spun off from the Royal Bank of Scotland in 2014, the bank was at a crossroads.
RBS was still reeling from the 2008 financial crisis. In 2014, the banking giant, still mostly owned by the UK government, reported a massive $3.5 billion loss.
Attention and resources towards the Providence, Rhode Island-based regional bank were limited, and it showed. Deposits at Citizens fell from $100 billion in 2006 to $87 billion in 2013.
“We’d been starved for technology capital for years from RBS,” CEO Bruce Van Saun told Insider.
The bank was forced to constantly upgrade older infrastructure and applications, like a mobile application still running on a service from 2003, Van Saun said. Little, if any, was spent on growth opportunities.
But since its 2014 IPO, Citizens has maintained a balanced mindset toward tech spend whereby it constantly looks to do 30% more while keeping the budget relatively consistent.
“If we want to spend money on the new thing, then we’ve got to figure out how to extract dollars from someplace else,” Van Saun said.
From engineer hires to a hybrid-cloud approach
Citizens’ turnaround has included a partnership with Amazon Web Services to migrate operations to a hybrid-cloud model and an agile tech development strategy. All of it is done as the bank eyes a national expansion, despite a budget the fraction of the size of bigger players.
The largest US banks — JPMorgan, Bank of America, Wells Fargo, and Citigroup — had annual tech budgets to the tune of $8 to $11 billion in 2018. Citizens spends “about 11% of our expense dollars” on tech, or roughly $440 million per year, according to Van Saun.
Since gaining more control of its budget, the bank spent the past two years catching up, Van Saun said.
It has hired 400 engineers since 2018, mostly based in Rhode Island and Massachusetts, and is bringing tech work in-house from third parties, Van Saun added.
The bank also opened flexible tech hubs in Phoenix (40 employees), Dallas (10 employees), and Charlotte (10 employees). It has a data analytics group in Columbus, Ohio, where JPMorgan also houses a facility. Those hubs work side-by-side with business teams, a key tenet of Citizens’ agile methodology.
It’s also migrated to newer systems enabling the bank to own the development and release cycle, Van Saun said. The bank upgraded its mobile application to AWS and sunset its 17-year-old legacy platform in 2020.
And it’s on a weekly release cycle, as opposed to the typical six-month one when the vendor controlled time to market.
Focus groups allow Citizens to quickly incorporate feedback and continuously refine its digital products, “which, we, in the olden days, had no shot at,” Van Saun said.
As for AWS, the plan is to move roughly half of Citizens’ workload to the public cloud, the majority on AWS, and build out a private cloud to de-risk applications that require high-performance and those needing to be near data centers.
It shuttered two data centers in May and now has seven total. The ultimate goal is to be mostly cloud-based by 2027, and maintain only two data centers, a primary and a back-up, Citizens said.
Improvement in productivity hasn’t been without internal debate.
The bank has kept its tech spend steady at roughly 10-12% of overall expenses, despite it becoming more efficient. Executives questioned whether to lower the bank’s capital expenditures to compensate for the efficiency, returning money to shareholders instead.
“As you can imagine, the CFO lost that discussion,” Van Saun said.
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