Online Lenders Aren’t Keeping JPMorgan’s Jamie Dimon Up at Night, but Who Is?

Online lending may be taking the SMB loan market share away from banks, but it is payment services startups that

In a sit down with Bloomberg, JPMorgan Chase’s CEO Jamie Dimon touched on various topics affecting the banking industry. Beginning the Q&A, Dimon was asked about the vulnerability of traditional banks to the emerging fintech sector, with specific focus on online lenders and whether he views them as a real threat.

Answering on the subject, Dimon explained that the banking community is already “a huge user of technology” and added that “digitizing services” has been taking place his entire life. Nonetheless, even though technology is being used to make banking “cheaper, better, and faster for the client”, fintech startups who believe they can do things even better are arriving to challenge incumbents.

On this challenge, Dimon focused on online lending. He explained that the explosion in online lending taking place is in reality a big data play. As such, according to Dimon, the online lenders are offering services more or less in line with what JPMorgan Chase is offering, but instead of loans being processed in two weeks they are taking place in 15 minutes.

According to Dimon, this efficiency is an advantage to the online lenders and a challenge for banks, but one that they can solve by for instance offering existing borrowers solutions to speed up follow on loans they take. But, overall, Dimon didn’t view the online lenders as a serious threat since their solutions are something banks can match in the future or engage in partnerships such as the one they signed with OnDeck to profit alongside the fintech startups.

It will be a challenge for anyone to be better, faster, cheaper than us

Where Dimon did believe a threat to incumbents exists is in the world of payment systems and deposits. He explained that currently his bank has 23 million customers using their phone to bank and added that banks are very good at providing digital solutions for their customers stating “it will be a challenge for anyone to be better, faster, cheaper than us”.

Nonetheless, Dimon cited that there is a belief that branchless banks can compete against traditional banks, and stated “that can prove true in some cases”. Overall though, Dimon mentioned that he still believed innovation in digital solutions will come from the banks, but that they would be vulnerable if “someone comes up with something great” that could compete with their payment systems and deposit businesses.

As for challenges facing fintech companies, Dimon focused on credit. He explained that one of the issues facing online lenders is “where will their provider of credit be when there’s a crisis?”. Due to the vulnerability that a credit crisis could dry up available capital from lenders and stall their business, Dimon described the “smarter services” as taking the opportunity now to source “more permanent capital to sustain their business”

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