JPMorgan’s Jamie Dimon Says Fintechs Like PayPal are an Enormous Threat to Our Banks

According to JPMorgan Chase CEO and chairman Jamie Dimon, fintech is one of the “enormous competitive threats” to banks.

In his annual shareholder letter that was released on Wednesday, Dimon writes, “Banks … are facing extensive competition from Silicon Valley, both in the form of fintechs and Big Tech companies,” like Amazon, Apple, Facebook, Google and Walmart and “that is here to stay.”

The CEO believes Fintech companies, like Stripe, PayPal, and Robinhood, “are making great strides in building both digital and physical banking products and services. From loans to payment systems to investing, they have done a great job in developing easy-to-use, intuitive, fast and smart products.”

He argues that this is why “banks are playing an increasingly smaller role in the financial system,” he said.

While traditional banks have “significant strengths,” like “brand, economies of scale, profitability and deep roots with their customers,” Dimon also remarks on their disadvantages including being “inflexible ‘legacy systems’” along with “extensive regulations,” hindering innovation within banks, though they can arguably also make banks “safer” option for consumers, too.

“Fintech’s ability to merge social media, use data smartly and integrate with other platforms rapidly (often without the disadvantages of being an actual bank) will help these companies win significant market share,” the CEO added.

″[M]any banking products, such as payments and certain forms of deposits among others, are moving out of the banking system. In addition, lending in many forms is moving out of the banking system,” Dimon stated.

Americans have become more willing to use fintechs amid the pandemic according to a 2020 McKinsey & Company survey. The firm revealed that fintechs are “catching up with traditional banks in terms of customer trust.”

Dimon is calling however for government regulations aimed at creating a “level playing field” for banks, fintechs and nonbanks alike.

Disclaimer: We have no position in any of the companies mentioned and have not been compensated for this article.