Where did JPMorgan Chase's Finn experience go wrong?

JPMorgan Chase's decision to close its first Finn digital brand is prompting debate over whether similar units of traditional banks – including Wells Fargo's Greenhouse, Citizens Bank's Citizens Access, MUFG & # 39; PurePoint and Midwest BankCentre & # 39; s Rising Bank – may soon face the same fate.

JPMorgan launched Finn in October 2017 with the aim of attracting Millennials. But she announced Thursday that she would end the brand on Aug. 10, introducing her customers into the Chase Mobile app and replacing their Finn brand debit cards with JPMorgan branded cards. This decision comes one day after HSBC announced the deletion of its budgeting application, Connected Money.

Some see it as a sign that traditional banks can not compete successfully with competing banks and fintechs using separate brands, but others said the problem was related to the performance of the banks. idea by JPMorgan, not the concept itself.

"They failed largely because of an indistinct digital banking offer," said Wei Ke, a partner at Simon Kucher and behavioral psychologist.

Finn offered a free account, automated savings based on user-defined rules, the ability to track savings, and the ability to mark each purchase as a need or desire. But much of this can be found in other mobile banking and challenger banking applications, observers said. Other banks, on the other hand, have more specific objectives in mind with their exclusively digital experiences.

"Chase's decision underscores the need for banks to clearly define their strategic objectives," said Dan Latimore, executive vice president of Celent. "Citizens Access, for example, clearly expresses its desire to build deposits and is willing to pay higher rates to do so. A full-service hybrid digital bank like Finn, however, had more difficulty making himself heard, especially to differentiate himself from Chase's main offering. "

Emmett Higdon, director of digital banking at Javelin Strategy & Research, suggested that first digital brands have to offer something unique beyond traditional banking applications.

"Many digital banks are struggling to reconcile the traditional banking services required to retain their customers," he said. "They always seem to be looking for the lowest common denominator and forget about the little things that matter a lot in financial services, such as the money transfer functionality and excellent customer service. Simple functionality of paying bills recently closed for its customers. It is not surprising, therefore, that a large percentage of their clients do not like this, and now they have to look for this assistance elsewhere. "

There were also other problems. For example, the exclusively digital offers of other banks specifically target individuals seeking high rates. Chase's Finn savings rates ranged from 0.01% to 0.04%, which is comparable to the base rates of many large banks, including JPMorgan's.

On the other hand, Citizens Access offers 2.35% savings, 2.70% on online CDs; The rate of the bank's savings accounts is up 2.38% and it pays 2.77% on a CD of one year; and PurePoint Financial's savings rate is 2.75%.

JPMorgan's rates may seem logical given the millennial hearing that Finn was supposed to capture, observers said. But JPMorgan may not have gone far enough to satisfy these customers.

JPMorgan's Finn strategy was "smart in that the younger generation of clients they hoped to attract with Finn did not initially have a large savings balance, so offering high interest did not really meaningless, "Ke said. "This group of customers needs more advice and motivation to save.

Unfortunately, in this respect, Finn has completely missed the mark by not offering innovative advanced digital features to help a customer save. Qapital, Acorns and others have much more interesting and attractive features to achieve this goal. "

Cannibalize the clientele

Another big problem for JPMorgan was that 50% of Finn customers were Chase customers.

"Self-cannibalization will always remain a problem for new brands of banks, unless they expand into new geographical areas," Latimore said. "In some cases, this can be a desired result. For example, if a new brand is built on a newer kernel with a lower cost of service, the migration could be successful.

At both Citizens Bank and the Midwest BankCentre, leaders wondered if this would be a problem. So far, this is not the case.

"We remain confident in our strategy and are very pleased with the performance of our Citizens Access platform," said John Rosenfeld, President of Citizens Access.

Citizens Access has collected approximately $ 5 billion in deposits (two-thirds in savings accounts, one-third in CD). It has accounts in the 50 states and 71% of balances are raised outside the bank's footprint.

"By focusing on a specific subset of rate-conscious, digital-savvy consumers, whom we call optimizers, and targeting our marketing efforts beyond our traditional retail footprint, we have been able to generate additional deposits throughout the country, "said Rosenfeld. "There is no material cannibalization."

While the MidWest BankCentre Community Bank is based in St. Louis, clients come from far-flung states including California, Texas and Florida.

Is there value for a distinct brand compatible with digital?

There is considerable debate over the merits of established brands in launching separate entities.

"There is no doubt that the brand counts a lot in the banking sector," said Latimore. "Chase first piloted just" Finn. "That did not work, so they renamed it" Finn by Chase. "And that is Marcus of Goldman Sachs, incidentally.The advantage of a distinct mark is that it conveys a distinct atmosphere.The disadvantage is that the new logos are literally competing with thousands of established brands that have built a relationship of trust over the decades. "

Higdon sees only limited value in separating brands.

"Creating a separate brand and a second application to this effect has never worked well for established banks," he said. "Whatever the money spent on developing and launching this new application, it could be better spent to improve the digital experience of all your customers, through a single app."

Tom Blomfield, founder and CEO of Monzo, a UK-based bank that has recently surpassed 2 million customers, said the problem with the exclusively digital brands of traditional banks is that they must take over.

"This is a model we have seen in the UK a few times, where you get a pretty successful branch-based retail bank that rightly identifies pure-play digital challengers as a threat to the future." , did he declare. "You are a video blockbuster and you think streaming will kill you."

Banks will create a standalone brand with new technology to try to attract a younger audience with lower fees. RBS and Barclays are among the UK banks that have done so.

"We think that we need to create an autonomous solution, fund the project separately, send a team to create a challenger who will kill us before our competitors," he said. "It makes sense, but then they withdraw before he has a chance to kill the main bank."

There are many reasons for this, said Blomfield.

"Or do their technology experts say why are we spending on two technology platforms when we could consolidate and save on costs?" he said. "Or the risk and compliance managers say we have all these policies and procedures that you'd better follow, come talk to us about them, or they realize that they still have the huge cost base of the bank – The branch network, the existing technology, tens or hundreds of thousands of people and this inexpensive digital model can not work with this cost base, so they do not take the last step to You want to kill him and destroy 95% of the cost to let him prosper, I do not think anyone has the courage to do it. "

Instead, banks reintegrate the exclusively digital unit, quietly shut down and consolidate technology platforms.

"This has happened a dozen times in the last 10 years," Blomfield said. "I do not think Finn is different. It's disappointing, but it's pretty predictable.