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In a recent letter to shareholders, JP Morgan CEO Jamie Dimon warned of growing competition for Wall Street in the form of tech start-ups.
“Silicon Valley is coming,” Dimon said in the letter, which touched on technologies as varied as mobile payments, bitcoin and peer-to-peer lending.
“There are hundreds of start-ups with a lot of brains and money working on various alternatives to traditional banking,” the CEO warned.
Indeed, there’s been a boom in start-ups seeking to compete with banks in stock trading, lending and payments. LendlingClub, for example, received a lot of attention when it went public in December. The company acts as a kind of Kickstarter for loans, matching borrowers with lenders.
Research firm CB Insights recently wrote about dozens of so-called “FinTech” startups that are “attacking” products and services traditionally provided by banks, including Jack Dorsey’s Square, which provides capital to small businesses.
The question, CB Insights said, is whether banks are going to “lose their edge not because of their incumbent, large competitors, but because emerging startups inflict upon them a death by a thousand cuts.”
Dimon sought to reassure shareholders that the $228 billion bank is prepared to deal with the competition.
“Rest assured, we analyze all of our competitors in excruciating detail – so we can learn what they are doing and develop our own strategies accordingly,” he said.
Dimon conceded some to advantages to the newfangled approaches, however. Peer-to-peer lenders, for example, “are very good at reducing the ‘pain points’ in that they can make loans in minutes, which might take banks weeks,” Dimon said.
JP Morgan intends to combat the encroaching threat of techie lenders by working to make its services “as seamless and competitive as theirs,” he said. JP Morgan will also partner with these new lenders “where it makes sense,” he said.
Dimon also admitted the big bank could do learn a thing or two from new payments technologies, such as cyber currency bitcoin and PayPal.
“Payments are a critical business for us – and we are quite good at it. But there is much for us to learn in terms of real-time systems, better encryption techniques, and reduction of costs and ‘pain points’ for customers,” he said.
Silicon Valley has been encroaching on Wall Street in other ways, including nabbing talent. Google recently announced it has hired Morgan Stanley’s chief financial officer, Ruth Porat, who has been with Morgan Stanley for 28 years.
In 2014, Twitter said it had nabbed Anthony Noto as its CFO. Noto had been theGoldman Sachs banker who helped the social-media company raise $2.1 billion in its initial public offering just nine months earlier.
Even Facebook’s CFO, David Wehner, was a Wall Streeter before he switched sides — first in 2010 as CFO of gaming company Zynga. Wehner moved to Facebook in 2014.
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