JPMorgan Plans to Open UK Digital Bank in 2020

Need to Know

• JPMorgan Chase has outlined plans to open a digital bank in the UK by the end of 2020.
• JPMorgan Chase is following on the digital tails of the Goldman Sachs Marcus app, which earned $16.9 billion through offering savings products.
• As the UK leaves the European Union, so to will several banks, which creates an opportunity for JPMorgan Chase to fill the “Brexit gap.”
• Mobile banking in the UK is expected to triple in size from 12 million to 35 million in the next 12 months, according to a new study from Accenture.
• Five million customers opened accounts with digital-only banks in the first 6 months of 2019, and customer acquisition is increasing by 170%.
• JPMorgan Chase has preferred to stay local with its profitable domestic market in the past.

Analysis

JPMorgan Chase (JPM) is digitally expanding into the UK by the end of 2020, in an unprecedented international expansion for the profitable domestic US bank.

The latest is a move across the pond to mimic a move that the US’ other biggest bank, Goldman Sachs, made in 2018 with Marcus. 

“Anything Goldman Sachs can do, JPM can do better, or at least copy it,” said David Brear, chief executive of digital banking consultancy 11FS.

This is a huge move for JPM as it attempted to launch a digital bank in the US called Finn in 2018, but shuttered it only a year later due to a lack of clients and differentiation from the main Chase brand. JPM has been making other digital strides in past years, as well, including introducing machine learning and AI into its employee operations.

Different than Finn, however, is that JPM is planning to offer not only savings products in the UK, but lending as well. This is unique because Goldman Sachs only offered high-interest rate savings accounts.

John Cronin, analyst at Goodbody, said in a Financial Times piece, “The UK has lots of players but the competitive landscape is still very concentrated, and for someone with financial firepower and sophisticated lending ability there could be an opportunity to shake up the market.”

This American influx into the British banking economy is perfectly timed with Brexit, which will see multiple banks leave the UK, right as mobile banking sees explosive growth. A new study from Accenture states that digital-only bank customers (such as Marcus and JPM’s new venture) are expected to triple in the next year from 12 million to 35 million.

Tom Merry, managing director of Accenture Strategy, told Mobile Payments Today, “Since their first arrival a few years back, digital-only banks have been challenging the status quo, primarily through the use of feature-rich apps and excellent customer service (more comparable to other industries). In addition, their brand has felt ‘fresh and different’ and the use of social media and modern techniques for encouraging advocacy, loyalty and a ‘movement mentality’ they’ve attracted people’s attention.”

During the first 6 months of 2019, 5 million customers opened an account with a digital-only bank in the UK, showing a customer acquisition rate growing by 170%. Not only do digital banks have significant cost savings and customer service improvements, but they feel “fresher” to the public.

JPMorgan Chase has picked an ex-regulator and consultant to JPM, Clive Adamson, to head up the UK launch plans for the digital bank.