‘FinTech and BigTech are here big time’, says JPMorgan chief

JPMorgan chief executive Jamie Dimon has warned traditional banks of incoming threats from FinTech and BigTech disruptors in his annual letter to shareholders.

The banking chief claimed that banks are “playing an increasingly smaller role in the financial system”.

JPMorgan posted revenues of $119.54 billion in 2020 and are considered one of the “Big Four” US banks.

They currently have around 12,000 staff in London and 19,000 in the UK.

Dimon highlighted that traditional banks have “significant strengths” including their brands, economies of scale, profitability, and “deep roots with their customers and within their communities.”

However, he acknowledged they “have flaws of their own making” which he attributed to “bureaucracy, complacency and lack of a deep competitive spirit.”

Dimon highlighted several of what he saw as the weaknesses banks have including a reliance on legacy systems, which he said need to be moved to the cloud if they are to remain competitive, and the extensive regulations which traditional banks are beholden to.

As the importance of cloud, AI and digital platforms grows, these competitive threats will become even more formidable according to Dimon.

The bank chief cited statistics which indicate the reduced size of banks relative to the entire financial system, due to the increased role of FinTechs, BigTechs and “shadow banks”.

A shadow bank is a financial intermediary which facilitates the creation of credit but who are not subject to regulatory oversight.

Dimon claimed traditional banks are “reliable, less-costly and consistent credit providers throughout good times and in bad times”, compared to newer credit providers.

He also said “well-controlled, well-supervised and well-capitalised banks may be less risky to the system than those transactions that are pushed into the shadows.”

Dimon also emphasised JPMorgan’s ongoing commitment to AI, the cloud and digital; claiming cloud “brings many extraordinary advantages” including the “immediate ability to access data and associated machine learning with virtually unlimited compute power”.

Dimon also expressed pessimism on Brexit, claiming “Europe has had, and will continue to have, the upper hand” and that it “cannot possibly be a positive for the United Kingdom’s GDP” in the short term.

The billionaire predicted that Paris, Frankfurt, Dublin, and Amsterdam will grow in importance as more financial functions are performed there post-Brexit, but that “few winners are likely to emerge from this fragmentation.”

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