JPMorgan Chase needs to bring digital to the branch (JPM)

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JPMorgan Chase posted a solid Q3 2017 overall, according to its quarterly earnings announcement on Thursday — just a day after it officially became the largest US bank by deposits, taking the top spot from Bank of America. Alongside these gains, the firm continues to see positive digital momentum.

Chase continues to post strong, but decelerating, growth in mobile banking.

The firm likely still has the largest mobile banking user base in the industry.Chase now counts 29.3 million active mobile banking users — that’s a 900,000 user increase from last quarter, and a step up from 26 million flat in Q3 2016.
But user growth is slowing down. Chase’s annual growth rate of mobile banking in Q3 2017 was just 12%. That’s a healthy number, but it’s substantially lower than the 18% it saw in 2016. This isn’t a bad thing — mobile banking is likely approaching saturation among interested users, something that’s corroborated by a similar slowdown hitting Chase’s peer banks. But as the growth rate slows to the rate of customer acquisition, it’ll become increasingly important for banks like Chase to leverage mobile to attract and engage users, rather than simply providing it for access.

That’s why the efficacy of the technology powering Chase’s digital banking is critically important.

Chase customers still value the branch. In the bank’s earnings call, CFO Marianne Lake noted that the bank’s branch network, which consists of over 5,000 locations, is still driving 75% of the bank’s deposit growth — making it a critical channel. But that’s expected to change, as consumer preferences shift toward mobile and digital offerings, and so Chase plans to adapt accordingly. In addition to a slight branch decrease, the firm is “building out all of the other […] omnichannel pieces” to bolster branches and build a complete offering.
The firm could leverage its digital technology and large user base to propel that growth. Many of Chase’s peers are experimenting with evolving the branch, adding digital technology as a means of supplementing or replacing human interaction entirely. That could be a lesson for Chase, which could bolster its digital in-person offerings to please its large and engaged mobile banking base without removing a banking channel that customers value. That could help the bank better engage customers, which in turn might further improve loyalty and decrease attrition — Lake noted that mobile and digital offerings do contribute to stickiness — while growing the products its customers consume on a regular basis.

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