The rise of fintech has not been lost on the banking community. In his latest annual report released Monday, JPMorgan Chase & Co. (NYSE:JPM) Chairman and CEO Jamie Dimon said he now sees banks having a “decreasing role in the global economy.”
What Happened: While Dimon said banks “performed magnificently during the COVID-19 crisis,” he is concerned about the rise of shadow banks and fintech companies, how it will affect banks and vice versa.
“Banks around the world are already engaged in tough competition with each other," said Dimon, noting the phenomenal size of nonbanks such as payments companies, fintechs, exchanges and Big Tech that compete with traditional banks outside of the banking regulatory system for certain financial services.
"And those don’t include many others, such as Schwab, Fidelity or Vanguard — which also provide banking-type services."
Dimon also cited the “pace of change and size of competition are extraordinary and activity is accelerating,” with some of the companies competing against banks including Walmart Inc (NYSE:WMT), “which can use new digital technologies to efficiently bring banking-type services to their customers,” and Apple Inc (NASDAQ:AAPL), which he said is "already a strong presence in the banking-type services with Apple Pay and Apple Card, [and] is actively extending services into other banking-type products.”
“It seems unlikely to me that all the banks, shadow banks and fintech companies will thrive as they strive to take share from each other over the next decade,” said Dimon. “I would expect to see many mergers among America’s 4,000+ banks — they need to do this, in some cases, to create more economies of scale to be able to compete.
“Other companies will try different strategies, including bank-fintech mergers or mergers just between fintechs. You should expect to see some winners and lots of casualties — it’s just not possible for everyone to perform well.”
Why It Matters: Dimon pointed out the increased services that JPMorgan offers, and said that if banks want to thrive and compete, “they need to acknowledge the truth of this new landscape and respond appropriately — sometimes it truly is change or die."
Photo: Stuart Isett/Fortune Global Forum via Flickr Creative Commons.
