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JPMorgan’s UK digital bank is set to launch on Tuesday

Dive brief:

  • JPMorgan Chase’s UK retail bank – simply named Chase, as it is in the United States – is set to debut on Tuesday when the smartphone app launches, Sanoke Viswanathan, the CEO of the company’s international consumer growth initiatives, told The Times of London and the Financial Times in interviews released Friday.
  • The digital bank will initially offer checking accounts with a rewards program, but is expected to expand into savings, personal loans and investments, and mortgages, the publications reported. If the British effort proves successful, other plans would include expanding retailing to continental Europe and Latin America.
  • Chase wants to enable customers to “do all of their banking with us and not have to bank with other people” within three to four years, Viswanathan told the Financial Times. Despite this rough timeline, Viswanathan stressed that the company would be patient in its approach to growth. “We are in no rush to rack up numbers,” he told The Times of London. “The quality of the business we build is more important.”

Dive overview:

The launch of digital banking on Tuesday will mark the culmination of a three-year effort that, during its development, was named Dynamo. It wouldn’t be JPMorgan’s first attempt to create a separate digital bank. The bank closed its digital-only U.S. outlet Finn in 2019 after just a year, saying millennials – the platform’s target demographic – didn’t necessarily want a digital experience outside of what Chase could provide.

JPMorgan is entering a retail environment populated by incumbents such as HSBC, Lloyds, Barclays and NatWest, as well as native challengers Monzo, Revolut and Starling.

Viswanathan said JPMorgan aimed to disrupt the market to eventually join “the best few” banks in the UK. “We know we have our work cut out for customers to understand what Chase is,” he told The Times of London. “You could say that we have the advantage of the last player.”

Other benefits, however, could be access to JPMorgan’s inflated tech budget without the costs of a physical branch network. The bank’s regulatory expertise as well – and, again, JPMorgan’s track record – can give Chase a leg up on other challengers.

JPMorgan has not disclosed how much it invested in its UK digital bank – a somewhat secretive project the company did not publicly acknowledge until January. But Viswanathan told The Times of London “it’s one of the bank’s two or three main businesses.”

“London will be the global headquarters of something that could have far-reaching implications – the focal point of what the entire international digital bank will be like in the future,” he said.

The bank would not be the first Wall Street giant to launch digital banking in the UK. its investment banking operations instead of expanding its digital offering.

This formula may still work for Goldman. The savings option was popular enough that the bank stopped taking new applications for savings accounts in June 2020 to keep its deposits below a threshold of £ 25 billion, which would require tighter regulation. He started accepting new requests in February.

For JPMorgan Chase, however, international growth is the only way to grow in retail. Regulations prohibit the bank from acquiring additional US-based deposit-taking institutions because it already holds more than 10% of US deposits.

JPMorgan CEO Jamie Dimon had considered expanding its retail business overseas a decade ago, according to Bloomberg. But buying a competitor with a heavy in-branch footprint would waste the bank money “for the rest of our lives,” Dimon said.

Viswanathan stressed that the bank is “committed to [the U.K.] for the long haul. “

“We did not make this decision on a whim,” he told the Financial Times. “We’re going to spend hundreds of millions before we break even and get to a place where it’s a sustainable business, and we’re in no rush.”

The launch of JPMorgan’s digital platform comes after the bank ran a six-month pilot program with 6,000 of its employees. The bank has 19,000 UK-based employees, but most of them work in investment banking. The Chase effort employs 400 people in London, 200 in Edinburgh and 250 call center workers in India and the Philippines.

Even national banks have had difficulty launching digital platforms in the UK. NatWest closed its digital bank Bó in May 2020, six months after its launch.

The challengers also had to pull out of British German neobank N26, which cited Brexit in its decision last year to abandon the market and close all its UK-based accounts.

For his part, JPMorgan Chase may have to repair his reputation in Britain after the bank agreed to guarantee an investment of up to $ 4.8 billion this year in the failure of the European Super League. The football business collapsed – before all games were played – when nine of its 12 founding clubs gave up amid backlash from fans, leagues and politicians. The bank apologized, saying: “We have clearly misjudged how this deal would be viewed by the wider football community and how it might impact it in the future. We will learn from it.”

The launch of Chase won’t be JPMorgan’s first step in the UK this year. He agreed in June to buy UK digital wealth management platform Nutmeg for £ 700million ($ 972.8million). Elsewhere internationally, the bank has announced its intention to take a 40% stake in Brazilian digital bank C6. More recently, JPMorgan agreed to acquire nearly 75% of the payment platform from German automaker Volkswagen.

The bank has been somewhat of a serial acquirer this year, closing more than 30 deals, according to the Financial Times, which cited data from Refinitiv. In the United States, the bank announced that it will buy San Francisco-based OpenInvest, a platform that helps finance professionals personalize and report value-based investments. Last week, JPMorgan Chase agreed to buy the restaurant platform The Infatuation, which owns the Zagat guide and reviewer brand.

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