JP Morgan showed Incumbents can disrupt Startups:

Recently JP Morgan announced it will be releasing a free trade platform for it’s customers.  The bank is undergoing a transformation, moving away from offline legacy systems and into the digital age. Over the past two years, the bank has spent nearly $20B to scale its technology and prepare itself for the next generation of banking.  The move is challenging the idea that only startups are nimble enough to have true innovation of their business.

But JP Morgan showed Incumbents can disrupt Startups, this one move by JPM will put many FinTech startups in danger or out of business.

See also…Insurance incumbents don’t have the data advantage they claim

JPM executives believe that creating a digital ecosystem will help the bank better align with clients’ interests, by moving away from the industry’s traditional fee-based model to a more consumer-friendly ecosystem model.

I can’t say I disagree.  Great idea.

This strategy is evident in JPM’s recent announcement of its free trading platform, You Invest, which will give its 48M digital customers access to free trades with a flip of a switch.

CB Insights highlighted some Key Takeaways from their article below.

Key takeaways

  • Tech hiring is a top priority. JPM is making every effort to attract, train, and retain top technical talent, including proactively improving programs and partnering with fintechs.
  • JPM leads banks in active digital customers. JPM continues to improve its existing apps while also focusing on developing new ones (such as Finn) for future customers.
  • JPM boasts an industry leading credit card network. With an elite rewards network, JPM is able to use its credit cards as a lever to attract and retain valuable clients.
  • JPM began betting on payments a decade ago  — and it hasn’t slowed down since. JPM is all-in on creating a prominent mobile payment system in the US.
  • JPM is the first consumer bank to give free trades to all retail customers. JPM has established a new focus on retail investing with the introduction of its platform, You Invest, and reported launch of its own robo-advisor in 2019.

See also…Game Theory and Insurtech

Insurance Implications

For InsurTech and the insurance industry this announcement is important to highlight.  If incumbents in the insurance industry were to adopt the same strategy as JPM, undergoing digital transformations, and embrace the move to a digital ecosystem to align around customers – you might see Incumbents disrupting startups.

How do incumbents get there?

Talent – Insurance Incumbents need to learn to attract the top technology talent.

Invest – Insurance incumbents need to invest in this space to establish relationships, understand the ecosystem, and start making bets that this digital trend will continue.

Costs– Insurance incumbents have the size, scale, and ability to lower insurance costs/risks trades in the ecosystem – InsurTech wouldn’t be able to go head to head without the size and scale.  This is a huge advantage.

See also…InsurTech pressuring the system: who is winning?

Hopefully this brave move by JP Morgan is highlighting to the Insurance executives at established Incumbents the power they have and the need to prepare their firms for the next generation of Insurance.  The insurance industry has the ability to become the innovation industry, embracing change and being at the forefront of the digital transformation.

This type of move would threaten the InsurTech firms that are determined to disrupt the Insurance industry incumbents.

It’s time to Act.

About the author

Arnold Smith

Leave a Comment