JPMorgan Chase plans to launch a digital bank in the U.K., Sky News reported on Saturday.
Sources told the British news channel the bank is already in talks with the country’s regulators to launch a range of savings and loan products in the U.K. using the Chase brand in the next few months. JPMorgan Chase did not respond to Banking Dive’s request for comment.
The report follows U.S. investment bank Goldman Sachs’s move into the U.K. market with its own digital bank, Marcus, two years ago.
This wouldn’t be the first attempt by JPMorgan Chase to launch a digital bank. The New York-based bank launched digital bank "Finn" in 2018, before it shuttered the banking app a year later.
Following the bank’s attempt with Finn, David Brear, CEO of U.K. digital banking consultancy 11:FS, said it's interesting JPMorgan Chase is "having another go" in a completely different market.
"Many people pointed to an inability to get away from the mother ship's culture, governance operations, technology and it lacking any real differentiation as to why Finn was closed after only a year," he told Banking Dive in an email. "Moving to the UK where they have no retail operations allows JPMC to really rethink the things that matter most."
But JPMorgan Chase will have its fair share of challenger banks to compete with if it makes the leap to the U.K.
"Time will tell how successful they are as they are entering into a very competitive marketplace in the U.K. with players like Monzo, Starling and Revolut already doing most of what this could be," Brear said.
However, the U.K. market has one less potential competitor. German neobank N26 announced this month its decision to leave the U.K. and close all of its accounts based in the country by April 15, citing Brexit.
JPMorgan’s reported interest in launching a digital bank also follows Goldman Sachs’s own digital bank launch in the U.K.
In 2018, the bank launched Marcus in the U.K., attracting 50,000 customers in just two weeks, according to Finextra. The digital bank has more than 300,000 customers in the country.
In December, the Sunday Telegraph reported Goldman Sachs plans to slow down its growth in the U.K. to avoid surpassing £25 billion in deposits, which would open the bank up to a compliance burden under rules introduced after the 2007-08 financial crisis.
But back in the U.S., Goldman Sachs has aggressive plans to expand the retail bank, which it launched in 2016.
Goldman Sachs said it plans to double Marcus’s deposit balances by 2025 and nearly triple its consumer loans and card balances during that time frame. The bank also wants to introduce checking accounts by 2021.
U.S. deposits on the Marcus platform were $60 billion at the end of 2019's fourth quarter, PYMNTS.com reported.
Brear said the interest that incumbents like Goldman Sachs and JPMorgan Chase have in the digital banking space is a response to an increasingly competitive market.
“It isn't what they are doing that matters but the manner in which they are doing it," Brear said. "Giving birth to something new allows them to reset and benefit from startup mentalities, methodologies and technologies while not risking everything.”
"Many retail banks globally are facing squeezed margins, increasingly competitive markets and operational costs that they cannot do anything about but while having to spend billions and billions to maintain them. A greenfield challenger in this vein is their best way to do something about this quickly and avoid being the next victim of corporate evolutionary leaps ... like Nokia or Kodak.
"My biggest takeaway is don't just listen to what they say but watch closer to what they are doing — this isn't about another challenger bank but the future of JPMC," he said.