Original text here from Patrice Bernard (LinkedIn)
Despite their efforts, traditional banks remain unable to replicate the success formulas of FinTech. A prime example is J.P. Morgan Chase, which is now preparing to shut down its automated investment advisory platform, a field that is particularly telling.
The concept seemed straightforward, and many financial institutions worldwide have attempted to adopt it: an almost entirely online relationship, a limited range of investment options mainly comprising index funds, moderate management fees, and a minimal entry threshold. It shouldn’t be too difficult to develop a profitable business model that combines optimized cost structures with democratized access to investment.
However, despite employing these strategies, which have contributed to the success of disruptors like Betterment and Wealthfront over the past decade, J.P. Morgan is about to give up (the offer is no longer being promoted), firstly citing its inability to make the venture profitable (a challenge it tries to portray as sector-wide) and, more quietly, admitting its poor results in customer acquisition.
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Upon closer inspection, such as a comparative review by Forbes in 2023, the flaws of their solution become evident: higher costs compared to competitors, lack of personalized support (including the inability to contact a professional), and a subpar user experience. Its only advantage is the transparency it offers to existing Chase clients through integration into their banking app.
Taken together, these shortcomings clearly reveal the underlying reason for the failure: J.P. Morgan has not been able to emulate the efficiency of a true robo-advisor. Its traditional organization and operational modes, which it did not shed for this venture (for example, by creating a separate entity to spearhead the project), are incompatible with both a product whose technology allows for cost reduction and the implementation of state-of-the-art digital customer journeys.
In summary, the essence of FinTech is something that the old bank fails to grasp and replicate. While it can mimic the models, without simultaneously embracing the level of rationalization allowed by computer tools and the systematic focus on customer expectations that make the difference, it will never measure up. Moreover, when it is in a position of self-cannibalization (as is the case with J.P. Morgan, which offers other, more profitable investment approaches), it is heading straight for disaster.
