Just as the UK’s new breed of online-only challenger banks seemed to be making progress after a slow start they have a new challenge to face down – the arrival onto the personal banking scene of U.S. giant JP Morgan Chase. The Wall Street bank reportedly plans to launch a range of savings and loan products, including credits cards and mortgages, along with digital current account facilities.
JP Morgan joins rival Goldman Sachs with the launch of a fintech operation on these shores after the latter launched Marcus, the online-online savings products provider two years ago. The move can be read as a vote of confidence in the UK’s financial services sector. It could spell trouble for the weaker challenger banks as competition hots up.
JP Morgan will hold an advantage over existing UK high street banks by being able to combine a new, purpose built digital banking platform unencumbered by legacy IT systems and branches. It will also have an edge over fintech newcomers, backed by a parent company valued at over $400 billion and with long standing retain banking experience in North America.
It is believed that the new digital bank will operate under the JP Morgan Chase brand, rather than choosing a new name to operate the entity under. One of the biggest challenges that fintech challenger banks have had to overcome has been gaining the level of trust necessary to convince account holders to make it their main account. That’s defined as the account a main salary is paid into. That’s unlikely to be an issue for as established a bank as JP Morgan Chase.
Reports suggest that the bank has already held preliminary talks with regulators in the UK with a view to launching the new bank later this year. A UK operation would add to the 66 million retail account holders, almost exactly the same as the entire population of Great Britain and Northern Ireland, that JP Morgan already has in the USA. The bank also services four million small businesses over the Atlantic. The bank posted a net profit of $4.23 billion for the last fiscal quarter of 2019.
The increasing competition across the UK personal banking sector, with traditional high street banks already being shaken up by challengers such as Monzo, Revolut, Starling and TransferWise, can only be good for consumers. Mortgage rates are already at record lows as banks battle it out for business and JP Morgan is thought to be planning an assault on the mortgage market. Goldman Sachs’s Marcus has also been offering better rates on savings products that established British banks as it tries to win market share.
The cutthroat competition does, however, make for a tough environment for the banks themselves. German digital bank N26 recently announced that it was withdrawing from the UK. The bank cited Brexit as the reason for its decision but it did not go unnoticed that it had also failed to gain much traction in terms of accounts as it struggled with the level of competition on the British market.