On Friday (January 15), during the JPMorgan Chase Q4 2020 Earnings Call, CFO Jennifer Piepszak and Chairman and CEO Jamie Dimon talked about blockchain technology and the “very very tough competition” in the next 10 years against FinTech firms.
During the Questions & Answers segment of the conference call, Charles Peabody, President of Portales Partners, asked the following questions:
“Good morning. I have a couple of questions related to FinTech, and unfortunately, I was born in a wrong generation, so I need a lot of help. How dependent is the FinTech world on the banking system? As I understand, they lay on top of the pipes and the plumbing of the banking system. Do you have any leverage in a competitive world against the FinTech world?
“And then, secondly, I noticed that the OCC gave banks the green light to use public blockchain networks and stablecoins. Can you explain what importanance that has to JP Morgan?“
Jennifer Piepszak, the JPMorgan Chase CFO, replied:
“Oh, OK, sure. That guidance enables an offering of stablecoins on a public blockchain. That doesn’t impact JPM Coin. JPM Coin, you should think about as the tokenization of our customer deposits.
“It’s obviously very early. We will assess use cases and and customers demand. But it’s still too early to see where this goes for us.“
Jamie Dimon, the JPMorgan Chase Chairman and CEO, then added:
“And we are using blockchain for sharing data with banks already, and so we are at the forefront of that, which is good. The other question was about FinTech… Look, first of all, they are very good competitors… They are strong. They are smart. Some effectively ride the rails. So we bank a lot of them. You know, we help them accomplish what they want to accomplish…
“My view is we are going to compete –we need to — and we have to look at our split inside of what we could do better, or could have done better, and things like that. So I am confident we will compete, but I think we now are facing a whole generation of newer, tougher, faster competitors who if they don’t ride the rails of JP Morgan, they can ride the rails of someone else…
“I have told you before: everyone is going to be involved in payments. Some banks going to white label, which makes FinTech competitors white label banks and build whatever service on top of it, and we have to be prepared for that. I expect it to be veryvery tough competition in the next 10 years. I expect to win. So help me God.“
Peabody then had this follow-up question:
“So do they need the banking system to complete their loop of service or can they work completely outside the bank?“
The JPMorgan Chase CEO replied:
“Well, most of them will do for now, but I think it’s a mistake to say it’s going to be forever. They’re getting bank licenses. Utah is giving industrial licenses. Like I said, banks are white labeling. So, it’s effectively the same thing…
“If a FinTech company uses a white label bank just to process their business, they’re basically a bank. You know, what the regulator will do, I don’t know, but we have to assume that they are going to do it. And that some will find ways not to use the banking system, which they have done… I am not against that. The regulators may have a point of view about that one day, but I am less worried about that. I am going to worry about us.“
It is worth pointing out that on January 4, a team of J.P. Morgan global market strategists led by Nikolaos Panigirtzoglou, reportedly wrote in a note to clients that, over the long term, Bitcoin’s price could get to $146,000 and higher.
Dr. Panigirtzoglou is a Managing Director at J.P. Morgan who works on Global Market Strategy. He edits the weekly publication “Flows & Liquidity”, which is one of J.P. Morgan’s flagship publications. Before joining J.P. Morgan in 2004, he worked as a Financial Economist at the Bank of England. Dr. Panigirtzoglou holds a PhD in Finance from Queen Mary University of London, an MSc in Economics from London School of Economics, and MSc in Economics and Finance from Warwick Business School.
According to a report published by Bloomberg on December 5, Panigirtzoglou and his team wrote:
“A crowding out of gold as an ‘alternative’ currency implies big upside for Bitcoin over the long term… a convergence in volatilities between Bitcoin and gold is unlikely to happen quickly and is in our mind a multiyear process. This implies that the above-$146,000 theoretical Bitcoin price target should be considered as a long-term target, and thus an unsustainable price target for this year.”