Here’s why JPMorgan got Finn wrong (JPM)

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JPMorgan Chase has closed its digital bank, Finn, merely a year after launching it nationwide in June 2018, according to The Wall Street Journal. While Finn was mainly available via app, users could also access JPMorgan Chase’s branch services, like visiting tellers.

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Additionally, Finn didn’t charge its users any monthly fees. Finn users will now have to download Chase’s mobile app to receive a new debit card, but their account numbers and direct-deposit details won’t be changed. They’ll also be exempt from paying the $5 monthly fee JPMorgan Chase normally charges for its most basic accounts.

While Chase didn’t give any customer numbers for Finn, Forbes cited Cornerstone Advisors estimates that the challenger only onboarded 47,000 customers.

Here’s what it means: While the idea to launch a digital challenger was good, the project lacked the right execution.

There wasn’t a significant difference between Finn and JPMorgan Chase’s conventional mobile banking app. Finn was built on top of the same back-end infrastructure as the bank’s conventional mobile banking app. As such, the two looked very similar, potentially not giving customers enough differentiating features to push them to open an account with Finn. Additionally, JPMorgan Chase rolled out a national online-only account-opening process that was similar to Finn’s onboarding process, making Finn irrelevant for customers who couldn’t visit branches to open an account.
While Chase was looking to establish Finn, it also expanded its branch network into new cities. Despite JPMorgan Chase having 50.7 million active digital users, it’s been focusing on increasing its physical presence: Last year, the bank announced it would open 400 new branches in the next five years to expand into new cities. So, although Finn was built to reach new areas of the US, rolling out branches in those cities likely diminished the need for a digital-only brand in those locations. Opening so many new branches may have also resulted in JPMorgan Chase not being focused enough on Finn to make it a success.
Finn couldn’t compare with market-leading features offered by other challenger brands. One reason digital challengers attract customers is that they offer market-leading services. Goldman Sachs’ Marcus, for example, offers US customers an interest rate of 2.25% — one of the leading rates in the country — and has accumulated $35 billion in deposits since launch in 2016. This was likely a further blow to Finn’s success.

The bigger picture: Finn failed to be a fruitful project for Chase, and other incumbents should take note of what went wrong to ensure they don’t make the same mistakes.

Launching digital-only offshoots is becoming a popular trend among incumbents — but this isn’t the first time one has failed. HSBC is looking to launch a digital banking project, dubbed Iceberg, while NatWest is working with UK neobank Starling to roll out its own offshoot called Bo.

However, the latest failure of such a project is further testament that it isn’t sufficient to simply launch a digital brand: Banks need to ensure they understand what customers want and provide them with services that will push them to bank with a challenger.

This isn’t the first time an incumbent’s attempt to launch its own challenger has failed: Just last month, Investec shut down its robo advisor platform Click and Invest. To make the success of such projects more likely, incumbents would be wise to work together with experts in the digital-only space, which can help guide their developments to ensure they get rid of consumer pain points. Hence, NatWest’s approach of working with Starling may lead to a more fruitful result.

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