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JPMorgan’s UK digital retail bank has signed up 500,000 customers and received more than $10bn in deposits since its launch in September, but the bank is patient about reaching profitability.
Launched first in the UK, Chase offers retail bank accounts through a digital app and is expanding internationally, beginning in continental Europe.
But JPMorgan said Chase Bank, as the international initiative is known, expects to lose more than $1bn over the next few years.
The fledgling bank, like fintech startups, expects it to take years before it reaches profitability, due to heavy investment up front in technology and business development. For example, app-based Starling Bank was the first UK digital challenger bank to make a profit, which came in its fifth year after receiving its UK banking licence in 2016.
Announcing the Chase launch last year, Sanoke Viswanathan, CEO, international consumer at JPMorgan Chase & Co, said: “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.”
Viswanathan told investors recently: “Historically, banks have struggled to do well in markets outside their home markets in retail banking. We think this is changing with digital. There’s massive digital disruption happening around the world, and this opens up a window of opportunity for us.”
There are also a large number of fintech-based financial organisations challenging the status quo in the sector. Speaking to Computer Weekly last year, Ron van Wezel, senior analyst at Aite, said: “The challenger bank market is pretty crowded, and I am curious how JPMorgan Chase will position the new bank to compete against both incumbents and challengers. It is certainly not a walk in the park for the bank.”
JPMorgan is not the first US banking giant to launch a digital retail bank in the UK. In 2018, Goldman Sachs launched an online bank in the UK, known as Marcus, which offers savings accounts to consumers, whereas the bank is traditionally focused on institutional investors.
Read more about digital challenger banks
- Despite an acceleration in the use of digital banking services, challenger banks face the obstacle of winning customer trust.
- Traditional banks face challenges in the coming years due to an increasing number of millennials only using digital banks.
- App-based challenger bank Starling has seen a huge rise in its number of business and retail customers, despite the Covid-19 pandemic.