What the Failure of JP Morgan’s Digital Bank Can Teach Cryptocurrency Industry as a Whole?
- Digital banking is an emerging financial service which still needs to be improved significantly.
- Many people in the world do not have access to modern financial services and cryptos could potentially help provide a solution to the world's unbanked population.
Similarities Between Digital Banking and Crypto
The mainstream business world is constantly changing and evolving and this is reflected in the various developments that are undertaken by some of the largest companies, one of which is JP Morgan.
The firm has been very active in embracing the new age of finance with the announcement of its upcoming JPM coin as well as the launch of its standalone digital bank this week.
Finn, the bank in question, was announced in 2017 and was a move by JP Morgan to secure its place in the market even as the digital banking movement was taking root in the traditional financial sector. However, digital banking was not necessarily targeted at the older traditional players in the financial industry but rather as millennials and had features such as mobile banking apps and the use of physical ATMs.
Unfortunately, initial customer attention garnered Finn was poor and JP Morgan decided to close down their digital bank and instead move their customers to the banking products associated with their parent company after Finn was only able to secure 47,000 customers.
Rather than be seen as simply another failure among the many from a big company that experiments with various enterprises, there are many lessons to be learned by the blockchain community as it moves into the financial world.
Paving the Way
One of the first things that can be taken away from the entire fiasco is that the new and innovative technological advancements in the traditional financial market are not adopted by one single firm but by several.
Other banks that created their own digital bank were Wells Fargo and Citibank. This is because the digital bank market had sprung up and was gaining some amount of market share, particularly among young people and the banks wanted to get in on the action.
No Unique Value Proposition Offered By Digital Banking
This mirrors the current situation of cryptocurrency in that several mainstream institutions are looking to get a piece of the crypto market as it becomes more popular.
Despite this, Finn and several other digital banks failed and there are a number of reasons for this.
One of the reasons was that bank was built on the same technology as the parent company and as such, there is very little difference between the products being offered and also the company did not give promotional interest rates or juicy incentives to users and on top of this, the digital banking platform was intended to cater to the market in places that did not have physical branches but they eventually opened those branches which led to Finn being unnecessary.
Institutions Do Not Provide Wide Range of Financial Services
The same reason highlights the fact that as much as we are in the digital age, consumers still see an appeal in physical locations as there is some sort of security in them and while they embraced the digital world, they did not necessarily feel comfortable putting all their funds in an institution they cannot walk into.
This poses a problem for cryptocurrency as it seeks mainstream adoption because, by its very nature, it does not rely on physical locations.
Also, the nature of crypto wallets makes them unlikely to merge easily with traditional banking services. In order to get around these problems, it is important that as the crypto industry expands they offer customers a sense of physical security and not just a digital one. This includes live chat, customer service forms and so.
In essence, anything we can do to make the customer feel as though you're interacting with other people.
As for the blockchain industry, it will be in their best interest to serve new Industries and make use of new business models such as online gaming, micropayments for various services and so on.