Post on 10-Aug-2015
transcript
“There are hundreds of startups with a lot of brains and money working on various alterna3ves to tradi3onal banking” Jamie Dimon Chairman and CEO JPMorgan Chase & Co. April 8, 2015
Banking Is (SDll) Under AGack
Kevin Weeks
Basic Personal Banking • Checking, savings, debit and prepaid cards, transfers • Ultra low margins so massive success requires massive scale How can a company be disrupDve in
this space? Who’s gunning for it Commentary
Deliver a be*er customer experience: Mobile first or mobile only. Avoid piZalls of compeDng with a huge retail footprint
Big: Small:
• May beat brick and mortar incumbents but hard to differenDate from other startups
• Online-‐only banking is crowded (Ally) Be*er asset gathering: Technology-‐enabled or other creaDve asset gathering techniques can win customers
Big: Small:
• Collect interest on lots of small bases • New customers demand convenience through technology
• B&M model is a poor use of assets
Create a way to earn be*er net interest margin: Net interest margin is bank’s biggest compeDDve advantage but it’s not unbeatable
Big: Small:
• Two ways to do this: find cheaper money or charge higher rates
• Customers may not expect interest income now, but when rates rise…
Sell shovels and pick axes: Build ancillary services that leverage bank infrastructure and help startups gather deposits
Big:
Small:
• APIs “export” bank trust • Blockchain could kill this
Lending • Personal loans, credit cards, student loans, home & auto loans • UnderwriDng quality not truly tested unDl economic downturn How can a company be disrupDve in
this space? Who’s gunning for it Commentary
Be*er underwri>ng: Use more or beGer data to make underwriDng decisions. Data-‐driven feedback loops may create network effects
Big: Small:
• Hard to only compete on this dimension now because LC and others have scale, distribuDon and proprietary historical data
More targeted marke>ng: Target “fat tails” of underwriDng curve. (e.g. good risks paying too much, bad risks not paying enough)
Big: Small:
• Cherry-‐picking customer populaDons can shrink the size of the market preGy quickly
Deliver a be*er customer experience: Faster service, less fricDon in applicaDon process, etc.
Big: Everybody! Small: Everybody!
• This is table stakes for disrupDng tradiDonal lenders, but there’s sDll plenty of room for improvement
• Mobile, automated payments, etc
More crea>ve financing: Find a different asset to lend against or other behaviors to finance
Big: Small:
• This is a potenDally huge, relaDvely untapped market
• A wide range of unleveraged assets exist in the market today
InvesDng and Wealth Management • Historical delineaDon between self-‐directed invesDng and
professionally-‐driven invesDng is becoming less important How can a company be disrupDve in
this space? Who’s gunning for it Commentary
Take more costs out of the system: Remove people, brick & mortar and transacDon costs. Use technology to scale economically
Big: Small:
• DisrupDon has already removed lots of costs-‐ trading margins are historically low and online-‐only exists already (Ameritrade, Etrade, etc)
Gather more assets by providing more personalized service: Use tech to beGer serve customers. Like checking, this is an asset gathering race
Big: Small:
• Algorithmically-‐run “roboadvisors” offer personalized advice based on customer preference or data
Address new markets and/or new customers: Make products that banks don’t want to/can’t make or serve audiences that banks don’t want to/can’t serve
Big: Small:
• Open inaccessible asset classes • DemocraDze previously opaque informaDon
• Growing demand in the market for alternaDves right now, but if the bubble bursts…
ReDrement, Payroll and Benefits • Historically these were bundled enterprise sales, so this is not in
the scope of this “consumer-‐facing bank disrupDon” report • That being said, I see two major areas of opportunity:
– New economy: How do freelancers/1099 economy address this? – Be*er service for the employer:
Insurance • Insurance seems like one of the last dinosaurs to feel real pressure
from startups • Two observaDons:
– Life insurance: DramaDc under-‐penetraDon + high-‐touch agent-‐driven distribuDon model + commodity product = ripe for disrupDon
– New risks to insure against in new economy: How do we insure Uber drivers, AirBNB users, crowdfunding investors, doctors on ZocDoc, etc?