What Are Jamie Dimon’s Views on Fintechs?
Why Goldman Sachs Is Acquiring Tech Startup Honest Dollar
Are fintechs a threat to investment banks?
Jamie Dimon, CEO and chair of J.P. Morgan (JPM), expressed his views on fintech startups at an RBC Capital Markets Financial Institutions Conference last week. He thinks emerging fintech startups are doing a good job, but do not pose a big threat to the bank. Dimon mentioned that banks have been using technology heavily and digitizing services to bring about cost-related efficiencies for customers. Since the implementation of the Depository Trust & Clearing Corp, the cost of placing a trade has fallen by one-tenth. Dimon believes these fintech startups rely on big data, thus making the lending cycle faster. He believes these startups can underwrite loans much quicker compared to traditional banks using big data.
What is the real threat?
The threat, however, is from payment systems. Customers of traditional banks (KBE) have adopted mobile banking as a mode of transacting. J.P. Morgan has 23 million phone banking users and Dimon thinks becoming faster and cheaper is a challenge for these startups. However, branchless banks can be a threat in terms of costs. However, J.P. Morgan has partnered with On Deck to take advantage of the services provided by these companies. Dimon also feels that these startups are at risk in case of a crisis. They do not have a permanent source of funding to survive a crisis situation. Further, he mentions that once these startups grow substantially, they are going to be regulated in the same way as banks. At present, they are free from stringent regulations because they are small and insignificant to the overall system.
Impact on the financial sector
Fintech startups are posing a growing threat to larger established banks like Wells Fargo (WFC), Bank of America (BAC), and Citigroup (C). Experts believe that these banks need to continuously enhance their technology to stay competitive.
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