Chasing a Slice of the UK Banking Sector: JPMorgan’s ‘Chase’:

Introduction:

For the first time in its longstanding history (222 years!), JPMorgan has launched its first international expansion outside of North America.

On 21st September 2021, Chase, a multinational investment bank and financial services holding company was launched in the UK. JPMorgan Chase & Co is one of the one of the “Big Four” consumer banks in America, sitting alongside the Bank of America, Citigroup and Wells Fargo. Together, they hold 45% of all US customer deposits. Chase alone serves nearly half of all US households.

In the UK, Chase is a purely digital service through a mobile app and will have no physical bank branches. Its well-founded expertise in digital banking and fintech, coupled with its 3 trillion dollar balance sheet should set it in good stead to be successful in the UK. 

The UK Banking Sector:

So, why does the UK need Chase, yet another banking provider? Two reasons.

Chase aims to provide customers with a brand-new banking choice. Initially, Chase will only offer current accounts with a rewards programme. However, it also plans to expand into other areas such as mortgages and investment. JPMorgan have stated that they believe that there is currently an oversupply of mortgage providers so, at the moment, this is not their focus. They aim for Chase to be a full-service bank so do intend to add this product to their line. Secondly, their staged expansion plan will also enable them to concentrate on doing one thing well at a time. This is part of ensuring Chase’s long-term sustainability

A Brief Market Overview:

The UK current account market can be difficult to enter and even more challenging to stay. Barclays, HSBC, Lloyds, and NatWest, aka the ‘Big Four’, are home to seven out of ten personal current accounts. 

In March 2020, M&S announced it was closing all of its current accounts. In addition, it closed 29 High Street banks, accusing digital banks to be the root of the cause.  Similarly, Tesco Bank is to close all of its current accounts by November 2021.

UK banks are already faced with falling interest rates, lowered levels of borrowing and consequently high savings rates. All of this is coupled with fierce competition from other start-up digital banks such as Monzo and Revolut… and now Chase.

To be a real and profitable UK market player, Chase must secure enough customers. There are some anecdotes Chase needs not to emulate. Let’s take a look in the infographic below… 

All image rights belong to According To A Law Student (ATALS).

Tough Competition?

Despite being relatively new entrants, digital banks are causing a storm in the banking sector, and rapidly encroaching upon incumbents including the ‘Big Four’. These new entrants have forced the incumbents to provide more competitive services, and becoming more efficient and productive. On the brighter side, however, customers are offered a better service and the market is increasingly expanding through its ventures into new types of digital services.

However, it won’t be a walk in the park for Chase.

Let’s put ourselves in the shoes of a consumer for a minute. Most of us tend to stick with our providers – we like a sense of familiarity. Changing providers is therefore not common. As such, this is one of the largest hurdles that digital banks face as they chase us to make the switch to them.

Ironically, JPMorgan previously attempted to launch a digital bank, ‘Finn’, in the US – another example of a failed attempt due to being unable to onboard enough customers to survive. Also, at the same time Finn was developed, JP Morgan announced the building of 400 bank branches. These moves did not coincide well.

Chase has sought to be as attractive as possible to potential customers. Let’s take a look at how Chase hopes to attract enough customers … 

How Has Chase Distinguished Itself From The Competition Within The UK Banking Sector?

Customers are often allured to a bank due to it offering the best interest rate on savings or a token offering of a small sum for opening an account. Chase is no different, and seeks to make its mark on the UK banking sector through some eye-catching rewards… 

Firstly, it is free to open a Chase account. 

Secondly, once open, you can start earning 1% cashback on eligible debit card purchases for 12 months. This alterative tempting strategy has been adopted to encourage customers to use Chase as their primary bank account.

Thirdly, you can earn 5% interest on ‘small change roundups’. What does this mean? Well, when you make a debit card transaction and round this amount up to the nearest pound, the difference will be deposited into a savings account. Once there, this money will earn 5% interest for 12 months. 

Why Has Chase Chosen the UK To Begin Its Plan For Worldwide Digital Banking Dominance?

Reason 1: The UK Consumer Culture:

UK consumers are particularly open-minded to new technology, and there is an increasing demand for digital banking services. Currently, over one quarter of British people have a digital bank account (approximately 14 million people). This amount is three times more than those that had a digital bank in January 2019. The UK customer trend is clearly in favour of digital banking. 

Reason 2: Innovative Market:

The UK banking sector has a strong regulatory regime for financial services. For example, the UK was the first country to set up a fintech sandbox in 2015. A regulatory sandbox allows businesses to test innovative propositions in the market with real consumers. This move helped to encourage innovative propositions in the financial services market.

Reason 3: International Reputation:

The UK holds a strong position as a leader in the fintech industry, with London increasingly becoming a hub for fintech experts. This growth has been accelerated by the pandemic as utilising technology has become a priority across all sectors of the economy including banking. Fintech has therefore become a growing fee-earning area for law firms, with firms such as Linklaters and Norton Rose Fulbright now offering specialist fintech services. 

It is evident that the UK has therefore established itself as a leader in the digital banking industry, so it is clear why Chase has been attracted here. JPMorgan’s expansion plan will see its consumer base increase and consequently boost their profitability. JP Morgan’s global brand power, resources and know-how provide a solid foundation for Chase’s success in the UK. So, what do you think? Is Chase capable of catching the competition?

This article was written by Mollie Bailey Hammerton. Mollie is a is Content Writer for According To A Law Student (ATALS) and a final year Law LLB student at the University of Liverpool, aspiring to pursue a career at the Bar.

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