Will JP Morgan’s digital only Chase launch shake up the UK retail banking sector?

What is ‘Chase’?

Chase is JP Morgan’s consumer brand and is one of the largest retail banks in the United States with over 4,700 branches. The bank can trace its routes back to the founding of “The Manhattan Company” on Wall Street in 1799 and as such is one of the oldest banks in the United States.

Why is Chase expanding into the UK market?

Chase launched in the UK on Tuesday 21 September 2021. This move is no doubt motivated by a number of factors, including the success of new UK digital challenger banking brands such as Monzo and Starling, as well as its American rival Goldman Sachs’ successful launch of ‘Marcus’ in 2016, offering competitive digital only savings accounts.

JP Morgan has stated it intends to “upend the UK banking market”, starting with Chase’s current account and savings offering, before expanding into personal lending, investment and mortgages over the coming years.

Arguably Chase didn’t make the best start, as the main courtside sponsor of the US Open some critics have suggested the launch on 21 September 2021 came 10 days too late given the British interest in Emma Raducanu’s storming success at Flushing Meadows!

Does Chase have any advantage over its competition?

In a word, capital.

JP Morgan is an enormous US bank with large cash reserves. It has adopted the popular instant notification features of its digital challenger bank rivals and its 12 month offer of 1% cashback on spending and a 5% interest ‘sweep‘ savings account immediately places it at the top of UK current account benefit rankings. It also offers 0% commission on spending overseas making it one of the best debit cards on the market for foreign spend. These features will inevitably attract numerous ‘banking savvy’ customers very quickly.

What are the main challenges for Chase?

The UK retail banking sector is dominated by the so called ‘big four’, Barclays, HSBC, Lloyds and NatWest, who between them control 70% of personal current accounts in the UK. This is despite lengthy UK government promotional campaigns of the Current Account Switching Service and the launch of digital challenger banks. The majority of UK consumers just don’t like switching their main banking provider.

Monzo and Starling, which both launched ‘beta’ versions of their debit cards and mobile apps in 2017, have proved popular among millennials as cards for day to day spending, with instant mobile notifications and brightly coloured cards being a large driver of this. However, they have both struggled to attract customers who want to park large cash sums in their accounts. Most current accounts with these providers maintain an average balance of less than £200, with customers ‘topping up’ from their main current account on a regular basis when they run out of money or before a night out.

Will Chase be able to break into the ‘big four’?

The first wave of new customers for Chase are likely to treat the account in a similar way to Monzo and Starling, using it as a day to day spending card rather than a main current account.

A digital challenger bank is yet to make a real ‘dent’ into the big four’s retail banking market share, but given its vast resources, Chase could well be the first to achieve just that.