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JP Morgan launch of UK digital bank expected next week

JP Morgan will launch its UK digital retain bank next week, and continental Europe will be next if it’s a success

JP Morgan Chase will launch its UK digital bank next week, and if successful, continental Europe will be its next port of call.

The news follows the recruitment of 400 staff in the UK to work at the digital bank, known as Chase, which will target retail customers.

It will offer retail bank accounts through a digital app and, according to the Financial Times, plans to expand internationally, beginning in continental Europe.

Sanoke Viswanathan, who is heading up the bank said it will offer lending and investment services.

The 222 year old bank is thinking long term. Viswanathan told the newspaper: “This is a very big strategic commitment from the firm’s standpoint. We will spend hundreds of millions before we get to break-even and get to a place where this is a sustainable business, and we’re not in a rush.”

In January Gordon Smith, chief executive of consumer and community banking at the firm, said the bank wants to provide customers with a new banking choice, “built on the significant capabilities of JP Morgan Chase”. 

David Bannister, chief analyst at Bloor Research, is surprised the company chose the name Chase for the new digital bank. “Sort of surprised that they’re using the Chase brand, which isn’t all that well known here unless you are over 50.”

Read more about the digital bank revolution

Another US banking giant which has already moved into the UK with a retail digital banking sector is Goldman Sachs, which opened ac loud-based retail bank in the UK, known as Marcus. The digital bank was built in the Amazon Web Services (AWS) public cloud, and is another example of a traditional bank launching a separate digital offering to keep pace with digital banking trends.

The launch comes at a time when consumers are rapidly moving to digital banking services. The Covid-19 pandemic has accelerated an already fast growing sector as people, that began using online and app based services during the pandemic, move to them permanently.

Digital startup banks take time to win customers and make a profit, but have still received huge cash injections as investors look to the long term.

Starling Bank in the UK, which reached Unicorn status earlier this year was the first new digital bank in the UK to report its first profit. In November last year when announced income was £800,000 higher than costs in the month of October.

There is an appetite for digital banks in the UK according to figures from independent price comparison site NerdWallet. It revealed that 60% of Brits would consider using a bank with no physical branches. 

The study showed that 40% are prepared to have a digital-only bank as their one and only provider, with 23% preferring both a digital and conventional bank with branches. But perhaps the most telling figure here is that about 60% of people still want access to a branch.

Challenger banks could see more money kept with them as wealth is passed on to younger generations. A survey by financial advisory firm DeVere Group recently found that huge numbers of millennials, people born between 1980 and 1996, only use digital banking services. These consumers could control vast swathes of the money in the economy over the next few decades.

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