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Chief Investment Officer
The Strategy of JP Morgan Chase
Chase is generally acknowledged to be the best of the universal banks. There is a reason for that lofty assessment, and it goes beyond Jamie Dimon. It is this huge company’s overall commitment to executing a long-term strategy across its various lines of business. Such commitment is not only admirable and elusive; it is also effective.
This strategic clarify is not a function of the bank’s size, but of its culture at the very top. It can and should be articulated for every company regardless to size. Here is what makes Chase a strong company:
To begin with, Chase has a well-defined and focused operating model, marked by four clear words:
Once you read these four words, you already know what this company is about. This kind of succinct description is what we all need; a simple description of what your business is really about. Remember the Ritz Carlton’s “Ladies and gentlemen serving ladies and gentlemen?”. Such a motto tells it all.
Chase added to these four words a few more descriptors to achieve better focus:
· Customer centric
· Mobile first – digital everything – multi-channel delivery
· Deeply integrated – payments as a holistic solution
· World-class technology and data capabilities
· Long-term strategic focus on growth and profitability
· Execute with discipline – capital, expense and controls
Admittedly, some of these words are quite aspirational… But these are good aspirations to have. Also, the specific go-to-market strategy implied by these words gives every other bank an opportunity to effectively compete against Chase by being where they’re not. Digital everything is a terrific market position, but it can only be successfully occupied by a couple of companies. It also opens the door for the rest of us to create a better digital/human linkage to outcompete the purely digital experience.
Digitization and electonification are central to the Chase value proposition of the future. Learning more about it will not only validate the necessity of investing more in the digital experience, and will also highlight the importance of differentiation for all non-universal banks.
Here is Chase’s analysis of the need:
· 57% of millennials would change their bank for a better tech platform
· 65% of clients would consider leaving a firm is digital channels are not integrated
· Non-branch factors are increasing perception of convenience (branch convenience was endorsed by 42% of respondents to the Chase survey, while digital factors were cited by 56% of the respondents)
· 76% of companies cite digital capabilities as “highly” or “very” important in selecting a banking partner
· 53% of wealth clients view digital as the #1 factor influencing their client service experience (AB: hard to believe…)
Chase then cites tremendous results in Net Promoter Score, Customer Retention, Share of Wallet and other customer-oriented metrics to demonstrate how effective the digital strategy has been. Equally important, but less noticed, are the business efficiencies that accompany digitization:
· 99% of the bank’s wholesale payments are processes straight-through
· Paperless statements save Chase $365 million annually
· Digital transactions, especially deposits, are 94% LESS costly than check processing costs
· The marginal cost of many electronic trades is approaching $0
Chase’s message is clear: digital everything. The benefits are numerous, both on the customer front and in the back office. Chase is committed to deliver digital value leveraging its unique scale advantage. It offers customers “what they want, where they want, how they want it”. It improves security by state-of-the-art fraud detection and mitigation tools. It looks to personalize the customer experience leveraging data and technology, creating unique insights for each client.
These goals are formidable, and the strategy sound and strong. I am confident that community banks can combat this strategy effectively across lines-of-business. The personal knowledge embedded in every RM’s, Wealth Advisor and branch banker’s mind cannot be duplicated by technology. It does need to be acted upon and leveraged to overcome the digital advantage of larger banks, Chase being just one example.
The more important vulnerability we have is in the client onboarding process. Case wants to make it easy to become a customer, and make it seamless to add products and services. This is critically important as the world moves to simplicity, and too many of us do not respond to that seismic shift.
Chase is planning on creating a streamlined and simplified customer documentation and approval process. The bank will enhance onboarding to facilitate expedited and digital account opening, enabling data collection from clients just once. The bank has already achieved a 90% reduction in Treasury management account opening time, and an 85% reduction in wealth advisor-supported client onboarding time. Chase is looking for a digital continuum for businesses of all sizes and complexities, including the corporate side.
I believe this can become a significant threat to community banks, if successfully executed. Many of us are still pondering the compliance issues associated with account opening, but that train has left the station many moons ago. Further, we do not spend enough resources on making it easy to become a customer of the bank. The barriers to entry can be significant, up to 45 minutes in person and 20 minutes on the phone or online. This can become a critical flaw to many of us.
My message isn’t – looks at Chase and see how wonderful they are. My message is:
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