June 18, 2019
Ever since its opening in 1871, JP Morgan has remained a valuable and reliable player among the top brands in the banking sector. So, when JP Morgan announced the launch of their digital-only bank, Finn, it was assumed that the innovative offering would be the new paradigm for incumbent banks; especially given that the bank designed it in-house by working closely with millennials for more than a year to understand their unique money management and banking-related behaviors/requirements.
They conducted trials for nine months in the state of Missouri (USA) before they rolled out the app. No wonder it came as a shock to the financial community when the bank shut down Finn within just a year of its launch. The question that has intrigued many in the industry remains – what went wrong? In this article, we try to analyze from our viewpoint.
Finn was targeted at young adults who wish to do transactions on phones rather than visiting branches. The app came with auto-saving features, smart budgeting tools, and emojis to enhance the experience of millennials. Moreover, to acquire customers, JPMorgan offered $100 to people who opened accounts and completed 10 transactions of certain types. It was seen as an add-on to providing regular branch-based accounts.
Competitors like Wells Fargo and Goldman Sachs are also promoting digital offerings under separate brands. After all these efforts in product development and given similar offerings by other competitors, the closing of Finn by JP Morgan comes as a surprise move. JP Morgan alerted Finn customers on June 6 that it will port over their accounts to Chase on August 10. Monthly fees will be waived indefinitely for Finn customers, and account numbers will not be required to change.
In our view, here are a few reasons that could have led to the shut-down of Finn:
1. Both Chase brand and Finn brand competing with each other: According to a JP Morgan spokesperson, The Chase brand is already among the most popular banks for millennials, so we’re leaning in on that, rather than continuing to build a brand from scratch. Moreover, Chase has already incorporated parts of the Finn app, like auto-saving features into its main banking app. This shows that customers of Finn did not feel the need to have a separate brand for meeting their banking requirements. More than half of Finn’s customers also have a Chase account.
By shutting down Finn, JP Morgan is also removing some mix-up in product usage. While the Finn app was targeted at digitally savvy millennials, the customers still had access to Chase physical locations for more complicated services. In short, both the brands were offering similar types of services.
2. A futile attempt to lure millennials: The Finn app was launched with a lot of emojis to attract millennials. The customers had the option of sharing their feelings about a purchase through emojis. Over time, customers could access a report which shows the motivation behind their spending habits.
However, this feature did not resonate with millennials who use such emojis on every other app. To them, it appeared like a futile marketing attempt with nothing new to appeal to customers. Clearly, one of the key lessons here is to have a well-differentiated product offering for a parallel brand to exist & thrive.
3. Competition from FinTechs/Challenger Banks: According to estimates from Cornerstone Advisors, Finn managed to sign up just 47,000 customers since inception. According to another estimate, Chime had 3 million customers as of Q2 2019, and BankMobile (US) has over 2 million account holders.
Another example could be Goldman Sachs’ Marcus, which offers US customers one of the best interest rates in the country. Finn did not provide its customers with features that they could not get with any other brand.
4. Diminished need for a digital-only brand: Chase has been focusing on increasing its physical presence. Last year, the bank announced it would open 400 new branches in new markets over the next five years. There was another announcement this year that the bank expects to open up to 90 new branches in new markets by the end of this year.
Clearly, the focus is on opening new branches. With new branches catering to new markets and Chase’s main banking app as support, there is a diminished need for a separate digital-only brand.
This move by JP Morgan to shut down Finn has already given rise to much debate about whether similar units of traditional banks could meet with the same fate. Despite having garnered close to 50,000 customers in the year it was around, Finn couldn’t survive in the long-term. Having said that, and despite certain commonalities, different digital banks tend to offer unique services that distinguish them from their competitors.
Could this be key to their survival over time? It remains to be seen! For the time being, we continue to debate what could be done differently for big banks to go completely digital.