# Analysis: JPMorgan, Goldman bet on tech to crack UK consumer market Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2021-07-12 Category: NEWS Category URL: https://financedigest.com/category/news Meta Title: JPMorgan and Goldman Sachs Aim to Crack UK Financial Market Meta Description: JPMorgan Chase & Co and Goldman Sachs Group Inc are venturing into the competitive UK consumer finance market to challenge dominant players. Can they URL: https://financedigest.com/analysis-jpmorgan-goldman-bet-on-tech-to-crack-uk-consumer-markethtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2021-07-12t111440z2lynxmpeh6b0gqrtroptp4britain-eu-france-banks-1736838192398-compressed.jpg) By Anna Irrera and Iain Withers LONDON (Reuters) – JPMorgan Chase & Co and Goldman Sachs Group Inc are taking on a consumer finance market many outsiders have tried and failed to crack: Britain. The two are testing the UK market to see if their U.S. retail brands, Chase and Marcus, can be rolled out globally. The challenge, analysts say, is scraping some business from customers who are entrenched with local providers. Success hinges on [whether they can deliver slicker technology and more attractive pricing](https://www.financedigest.com/graphic-chip-price-drop-raises-questions-on-whether-end-of-shortage-is-in-sight.html "Graphic chip price drop raises questions on whether end of shortage is in sight") than incumbents. Six lenders dominate the UK retail arena: Lloyds Banking Group PLC, NatWest Group PLC, Barclays PLC, HSBC Holdings PLC, Banco Santander SA and Nationwide Building Society. It will be difficult, analysts said, because [customers tend to have sticky relationships with banks](https://www.financedigest.com/christmas-debt-hangovers-how-banks-can-help-customers.html "CHRISTMAS DEBT HANGOVERS: HOW BANKS CAN HELP CUSTOMERS"). Transferring money or opening additional accounts can seem too much of a hassle. “The length of time it takes to build up a franchise in the UK is easily underestimated,” said Goodbody banking analyst John Cronin. “It takes years.” JPMorgan has already bolstered its British venture by purchasing digital [wealth manager](https://www.financedigest.com/analysis-credit-suisse-collapse-threatens-switzerlands-wealth-management-crown.html "Analysis-Credit Suisse collapse threatens Switzerland’s wealth management crown") Nutmeg for 700 million pounds ($973.00 million). The deal helps JPMorgan to tap a growing band of pandemic-era savers. Goldman, whose Marcus savings account launched in Britain in 2018, [plans to offer services like automated investment](https://www.financedigest.com/italys-a2a-trims-green-investment-plan-citing-economy-volatile-markets.html "Italy’s A2A trims green investment plan citing economy, volatile markets") management in the UK next year after gathering more than $30 billion in deposits here. Startups have also entered the [British banking](https://www.financedigest.com/hsbc-acquires-british-arm-of-stricken-silicon-valley-bank.html "HSBC acquires British arm of stricken Silicon Valley Bank") scene, including Metro and Monzo, but have made losses and have yet to crack the dominance of the big players. Germany’s N26 [exited the market](https://www.financedigest.com/atlantia-exit-highlights-milans-battle-to-retain-market-heavyweights.html "Atlantia exit highlights Milan’s battle to retain market heavyweights") after just two years. We are not underserved here; we have an awful lot of existing providers,” said Sarah Kocianski, [head of research at digital banking](https://www.financedigest.com/hsbc-appoints-new-markets-head-amid-wider-investment-bank-reshuffle.html "HSBC appoints new markets head amid wider investment bank reshuffle") consultancy 11:FS. “Who are they going to target?” TEST CASE JPMorgan CEO Jamie Dimon said last month the [bank is using Britain as a test](https://www.financedigest.com/what-to-make-of-the-headlines-brexit-and-bank-of-england-policy-eba-bank-stress-tests.html "What to make of the headlines? Brexit and Bank of England policy, EBA bank stress tests") case to expand globally. “The UK is the beginning,” he said. “If it works there, then we’ll think about other things we could do with that.” By offering products digitally, JPMorgan can see what strategies work best without the cost of branches, Dimon said. JPMorgan is the largest U.S. bank, with more than $1 trillion in consumer deposits as of March 31. Its retail [business accounted for 42% of revenue last year](https://www.financedigest.com/novartis-to-spin-off-generics-business-sandoz-next-year.html "Novartis to spin off generics business Sandoz next year"), and it plans to have branches in 48 out of 50 U.S. states by the end of summer. To grow, JPMorgan Chase’s retail business needs to stretch beyond the United States. For Goldman, consumer [banking is a key pillar of CEO](https://www.financedigest.com/ogrady-to-return-to-bank-of-ireland-as-ceo-irish-times.html "O’Grady to return to Bank of Ireland as CEO – Irish Times") David Solomon’s reinvention plan. He wants to reduce [reliance on volatile trading and investment banking](https://www.financedigest.com/banking-and-fintech-convergence-will-increase-reliance-on-it.html "Banking and Fintech Convergence will Increase Reliance on IT") revenues. Goldman’s fledgling [consumer business](https://www.financedigest.com/citigroup-says-will-close-russian-consumer-commercial-business.html "Citigroup says will close Russian consumer, commercial business") accounted for less than 5% of its revenue last year. Deposits topped $100 billion in the first quarter. Those figures are small relative to larger banks like JPMorgan, but Goldman is growing its [consumer business](https://www.financedigest.com/essity-mulls-selling-vinda-stake-and-consumer-tissue-private-label-europe-business.html "Essity mulls selling Vinda stake and Consumer Tissue Private Label Europe business") quickly to get cheaper funding and new revenue sources. “It mirrors what they are both doing in the U.S.,” said Morgan Stanley bank stock analyst Betsy Graseck. The rationale is they want to be [servicing all consumers](https://www.financedigest.com/do-consumers-want-robo-advisory-services.html "DO CONSUMERS WANT ROBO-ADVISORY SERVICES?") across savings, investing and borrowing. The two U.S. [banks have chosen Britain because of its established payments](https://www.financedigest.com/risk-of-uk-balance-of-payments-crisis-under-truss-is-rising-deutsche-bank-warns.html "Risk of UK balance of payments crisis under Truss is rising, Deutsche Bank warns") system, solid regulatory infrastructure, an affluent customer base and compelling talent, analysts said. The UK is an extremely attractive [market because of its thriving fintech](https://www.financedigest.com/2021-and-the-fintech-market-bonanza.html "2021 and the fintech market bonanza") ecosystem. Talent in the sector is both plentiful and ever-growing,” said Ben Richmond, CEO of regtech Cube, which provides regulatory intelligence to banks. Britain is also ahead in terms of Open Banking, which aims to give customers full [control of their financial data](https://www.financedigest.com/dollar-buoyant-as-robust-u-s-data-keep-fed-hawks-in-control.html "Dollar buoyant as robust U.S. data keep Fed hawks in control"), making it easier to switch banks. The UK is charging months ahead of the rest of Europe when it comes to [Open Banking,”](https://www.financedigest.com/barclays-private-bank-opens-new-office-in-verbier-switzerland-for-2022-23-ski-season.html "Barclays Private Bank opens new office in Verbier, Switzerland for 2022/23 Ski Season") said Aurelie L’Hostis, senior analyst at Forrester. [JPMorgan and Goldman](https://www.financedigest.com/jpmorgan-bofa-cautious-on-job-cuts-as-goldman-layoffs-loom.html "JPMorgan, BofA cautious on job cuts as Goldman layoffs loom") Sachs spokespeople declined to comment for this story. TOUGH MARKET But the British market is also tough. The four largest UK [banks reported](https://www.financedigest.com/bank-funding-for-renewables-stagnates-vs-oil-and-gas-report.html "Bank funding for renewables stagnates vs oil and gas – report") a collective 12% decline in revenues last year as rock-bottom interest rates squeezed income. The industry has been pruning branches to cut costs, since customers are visiting less in [favour of digital](https://www.financedigest.com/snap-happy-79-of-brits-ditch-digital-cameras-in-favour-of-phone-photos.html "Snap Happy: 79% of Brits ditch digital cameras in favour of phone photos") options. Yet the digital challengers, including Monzo, Starling and Revolut, have had a mixed [track record](https://www.financedigest.com/norway-on-track-for-record-gas-export-will-be-ready-for-winter-gassco-ceo.html "Norway on track for record gas export, will be ready for winter -Gassco CEO"). Some analysts, however, can see a path for JPMorgan and Goldman to take significant market share in [Britain in everything from deposits to home](https://www.financedigest.com/britain-launches-scheme-to-pay-homes-to-curb-electricity-use.html "Britain launches scheme to pay homes to curb electricity use") loans. New entrants can only compete by keeping [costs lower](https://www.financedigest.com/bmw-bets-on-design-and-recycling-not-mining-to-lower-battery-costs.html "BMW bets on design and recycling, not mining, to lower battery costs") than competitors. JPMorgan and GS might have a competitive advantage in that they have deep pockets to build the technology from scratch or [acquire new capabilities](https://www.financedigest.com/sp-global-acquires-firm-to-bolster-capability-to-track-commodity-shipments.html "S&P Global acquires firm to bolster capability to track commodity shipments") with fintech acquisitions,” said L’Hostis. Britain’s retail banks make the bulk of their profits on the difference between interest generated on loans – including from giant [mortgage books – and what they pay](https://www.financedigest.com/7-questions-to-ask-before-paying-off-your-mortgage-early.html "7 Questions to Ask Before Paying Off Your Mortgage Early") out on deposits, because they do not charge for basic current accounts. Goodbody’s Cronin believes there could be space for a challenger in home lending, where the ten largest mortgage lenders in Britain [accounted for 85% of the market](https://www.financedigest.com/opec-meeting-to-take-into-account-market-conditions-iraqi-official.html "OPEC+ meeting to take into account market conditions – Iraqi official") in 2020, based on data published by banking trade body UK Finance. “The returns in mortgages can be highly attractive, particularly if they can keep the cost base down,” Cronin said. Ultimately, the [cost of rolling out these initiatives](https://www.financedigest.com/green-initiatives-cut-self-storage-business-space-stations-energy-costs-by-75.html "Green initiatives cut self-storage business Space Station’s energy costs by 75%") has to be worth it, said Wells Fargo bank analyst Mike Mayo. For instance, JPMorgan scrapped its U.S. digital [bank Finn just a year after a nationwide](https://www.financedigest.com/comserve-to-support-allied-irish-bank-nationwide.html "COMSERVE TO SUPPORT ALLIED IRISH BANK NATIONWIDE") debut in 2017 because it did not work out as expected. They need to demonstrate a return on their [tech investments,”](https://www.financedigest.com/uks-dominos-expects-tech-investments-to-hit-2023-profit.html "UK’s Domino’s expects tech investments to hit 2023 profit") Mayo said. ($1 = 0.7194 pounds) (Reporting by Anna Irrera and Iain Withers, Editing by Lauren Tara LaCapra and Jane Merriman) --- This blog is powered by Superblog. 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