JPMorgan wants to become the Amazon of Wall Street
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- If Goldman Sachs wants to be the Google of Wall Street, it seems that JPMorgan wants to be Amazon.
- At an investor day presentation, CFO Marianne Lake set out the bank's "Digital Everywhere" strategy, while CEO Jamie Dimon mentioned Amazon Prime as a model for JPMorgan's banking efforts.
- "We are already deeply embedded in our customers lives at a scale and a frequency that we believe is unmatched," Lake said.
- JPMorgan's ability to implement this digital strategy across multiple business lines, many of which just happen to be market share leaders, has the potential to reshape the entire industry.
"The first opportunity we have to delight or to upset a client is when they walk through the door either physically or virtually."
Sounds like a tech executive, right? Jeff Bezos even? The Amazon boss often talks about delighting customers, after all, although until recently the ecommerce giant didn't really have doors to physically walk through.
But no, that's not a tech founder, or a retail CEO. It's Marianne Lake, the CFO of JPMorgan Chase.
In an investor day presentation Tuesday February 27, Lake went through the Wall Street giant's "Digital Everywhere" strategy. And later, JPMorgan chief Jamie Dimon, who's teamed up with Bezos and Warren Buffett's Berkshire Hathaway on a healthcare initiative, discussed Amazon Prime.
Taken together, the comments hint at JPMorgan's vision of the future of banking.
A generational shift
There's a generational shift taking place, according to Lake. Customers are demanding digital capabilities in all their interactions with the firm. "Think streaming films versus DVDs," she said. "Banking is no exception."
Now there are drawbacks to this shift, of course. The movie business used to make good money out of DVDs. Streaming films has been a more challenging business. For Wall Street, it means margins are likely to be compressed, meaning less money per trade.
"Jeff Bezos says 'Your margin is my opportunity,'" Dimon said in the Q&A portion of investor day. "You know, that's called competition. And so some of it gets passed on to the customer in terms of lower prices and lower spreads."
But there are clear benefits to these digital relationships.
"They create loyalty, they give us more shots on goal to deepen relationships," Lake said. "This drives higher volume for us, and leveraging our scale, that higher volume is much more profitable."
This shift is playing out across JPMorgan's business, according to Lake's presentation. For example:
- Consumer banking: 57% of millennials would change their bank for a better tech platform, according to JPMorgan. On the flip side, retention rates are 10 points higher for "digitally engaged households," and card spending is 118% higher.
- Corporate banking: 76% of companies cite digital capabilities as "Highly" or "Very" important in selecting a banking partner, according to research from Greenwich Associates.
- Investing: 85% of wealthy individuals use financial apps, and yet less than 10% of Chase customers today have investments with the firm.
- Trading: According to a JPMorgan survey of institutional investors, 61% of FX traders are extremely likely to use a mobile app to trade in 2018. Meanwhile, 93% of JPMorgan's top 1,000 clients use the JPMorgan Markets platform, with 30% growth in users accessing pre-trade information on the platform, and 60% growth in post-trade analysis on the platform. According to Lake, nearly half of JPMorgan's execution clients are reading the firm's research on the platform.
"We are already deeply embedded in our customers lives at a scale and a frequency that we believe is unmatched," Lake said.
Amazon Prime for banking
It also allows JPMorgan to take a different approach when rolling out new products. Dimon cited the example of Amazon Prime going into movies, likening it to how JPMorgan would roll out online investing.
"Who thought Jeff Bezos would go into movies?" Dimon asked the audience at the investor day. "And he just gives it away for free to Prime because Prime pays for itself and he's just trying to make you a happy Prime customer."
"Well we do a little bit of the same by giving a lot of things away for free as part a package. We look at the price of the whole package, not necessarily the products."
"That's why when we do online investing, we're going to be thinking about 'How are we going to add that to the product set in a simple way ... that the customer wants, so that they'll say 'I love this.'' Remember, if you're a great client, we can do it for free."
Now, JPMorgan's not the only bank thinking this way, of course. Goldman Sachs has said it wants to be to risk what Google is to search, for example. And McKinsey has highlighted the risks to traditional finance posed by so-called platform companies like Amazon, Alibaba, and Rakuten.
But JPMorgan's ability to implement these digital shifts across multiple business lines, many of which just happen to be market share leaders, has the potential to reshape the entire industry. JPMorgan might have the ability to "do it for free" for great clients, but many competitors won't.
"Digital capabilities will really differentiate players in our industry in the coming years. And in a digital world, we are always open for our customers, continuously, 24/7," Lake said.
"We do have a complete strategy, a plan for every customer type, for all of their needs, in each business and around the world," she added.
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