As the world becomes increasingly dependent on fintech for all financial transactions during the global pandemic, it’s been debated how traditional commercial banks will be able to adapt to this change. Economists have predicted that commercial banks will see a natural rise in profit as we start to come out on the other side of the pandemic with interest and inflation rates rising. JPMorgan Chase has even seen a 21% increase in stock value since the start of the year, so what’s the concern exactly? Well many popular fintechs such as Venmo and Cash App have a large advantage over commercial banks as they are able to move funds with ridiculously thin margins, which these banks just can’t compete with. They don’t require any proof of financial wellness to register, rather they make the majority of their money with instant transaction and other minor fees which eventually add up. Chase has claimed that they are successful in the digital space, having over 55 million users on their smartphone app, but that’s all they have had to show for up till this point. So what has exactly turned the tide in their favor?
According to David Trainer of Forbes, JPMorgan Chase’s stock remains undervalued as they have many key advantages over fintech startups looking to take their place. For one, Chase has a scale that many fintech startups may never see the chance of achieving. Chase is one of the longest standing globally used commercial banks there is, so to say they lack the resources necessary to make a meaningful transition into fintech would be absurd. The optimism that economists have for the firm have also generated massive attention and support from investors who are willing to fuel Chase’s future fintech endeavours. Trainer goes on to state that “past technology investments drive cost efficiencies which improve existing competitive advantages.” The research and developments Chase has already made in technology will only propel them further into the profitable fintech realm. It’s also a good point to say that being first doesn’t always mean best. Many of the fintech startups that are first in their fields are very niche, and once the market expands their services may become obsolete or they may need to broaden their services to accommodate the demands of customers. JPMorgan has also been able to stay ahead of Square Inc., one of their biggest competitors, since their inception, which is a good sign for them. There are arguments for both sides of JPMorgan Chase’s profitability and advantages in the fintech market, so it should be interesting to keep up with their progress in the coming few years.