What should a Bank do?

I had so much fun in the comments section today, thought I would make it a separate blog.  A ficticious “Jamie D” asked me a question “What should JPM Do”. My response is below

Jamie D…. you have the name of my favorite banker on the planet, so I will write with the assumption that he asked this question.

Two years ago Chase was the best Payments bank in the world. Best team, best market position, best strategy. They have completely lost their continuity, thus people must be at the top of the list. Payments is a brokering business.. which means you must play with both consumers and merchants. Gordon Smith was quite confident that he would win MCX 2 years ago I told him that the nature of payments has changed. It is now a LOSS LEADER (example google providing shipping for free and taking loss on payment). I asked Gordon “when was the last time you brought a consumer to a merchant”? Merchants use chase because of their efficacy and low cost in payment management. They don’t look to chase for solutions.. they beat you up on price because you deliver a commodity service.

To deliver a differentiated service you must be an easy bank to work with, you must enable COMMERCE. Today Chase is the hardest bank to work with on the planet, this extends from payments, to ventures, the partnerships. Start ups and the entire valley love Jamie, but run away from the rest of the team. Chase destroyed 2 companies (Payfone and gopago) buy writing term sheets and backing out of deals. It takes 2 years to get through chase procurement.. But by far the worst aspect of of Chase’s performance is their in ability to partner and listen. Your team acts more like the “Borg from Star Trek” (think Babylonians), they don’t listen and want everyone else to adapt to your strategy. Worse they “throw sand” in everyone else’s gears (example Chase was behind Visa’s cease and desist w/ Google). Being a “broker” and enabler means working to fit yourself into OTHER PARTNER’s strategy.. NOT MAKING THEM A COMPONENT OF YOURS. Google actually has this same problem.

What does JPM need to do? Here are my recommendations:

  1. Build a team that knows payments and knows how to partner. Their comp is not tied to building empires but on transaction volume and satisfactions. My funniest story on how bad the situation is in this blog here. Bank Grouponand How to Structure Bank Assets for Collaboration
  2. Continue focus on operational excellence in payments. You have a great core. These are the services YOU OWN
  3.  Build a team focused on how you can help others, enable collaboration. Consumers are NOT OWNED BY CHASE. How can you work with 1000 start ups and Fortune 100 merchants to create great consumer experiences (this is what I’m focused on). You are doing this with Paypal.. but with Amazon you actually pitched them a “Chase wallet button” to compete with Amazon One Click (and CPT was a partner for off Amazon)
  4. Data. Len is a great guy. I know his co-founder Michael well. You will not succeed in Data unless you can put on the clothes of a merchant and act like an partner. Amex is far ahead here and this is hard for me to say. Your team works well in payments operations.. not in VALUE DELIVERY. Data is about value creation and your data must be combined with at least one other source to deliver value
  5. Change the culture and the industry. Stop the Arrogance! Payments is not a business unto itself.. it is a commerce function. Chase’s assets extend beyond payment clearing. You have the opportunity to enable market and TRUST. These are far more valuable positions than low margin settlement. You do not have the leadership in place to function like this. Everything JD touches is on track when he is involved.. but atrophies in his departure. TCH is a clear example. If I had to pick one trait to change: collaboration.
  6. For God’s sake.. play nice with regulators.. you are bearing the costs of ignoring them for too long.

My top Blogs for Banks to read

3 thoughts on “What should a Bank do?”

  1. I like the side reference to Google (and really, many of the tech giants entering the payments space). It’s funny how the advice to both sides is very similar – stop with the egotistic view on partnerships of having others bend to your way of doing things, and truly collaborate to create new opportunities for BOTH parties. You have to give on some things if you want to establish a solid partnership where both parties are getting something out of it.

    The big banks know they need to partner (well, the smart ones anyway), but are two focused on having the upper hand to give anything away and create true partnerships. Apple clearly has the same issue by striving to establish their center of the ecosystem role as they enter payments, and now Google is facing the same dilemma as they attempt to work with issuers, without really understanding what issuers want or find value in. Surprisingly, Microsoft currently seems the most interested and fining true opportunities for partnerships with the traditional payment players.

Leave a Reply

Your email address will not be published. Required fields are marked *