FINTECHS vs JP MORGAN 2023

Who would you bet on? An Index of Fintech Unicorns or JP Morgan?

Late in 2021 when Fintech values peaked this CB Insights chart was paraded around – today its looking pretty sick, even with JP Morgan’s market cap also down. ?

The chart was supposed to show how Fintech’s would take over from banks – with 131 Fintech worth more than JP Morgan, it was only a matter of time cried all the fin- techie enthusiasts….. well not so fast! ?

RESULTS 2023

JP Morgan market cap value is down 20% to US$400 billion.

Fintech Unicorns however are down 68% - so who’s is winning?

It now takes 211 Fintech’s to match J P Morgan’s market cap – it’s all going the wrong way!!

FINTECH

Just consider the major Fintech Unicorns (some players on this chart)

Stripe – was the No1 Fintech in 2021, valuation dropped 34% to US$63 billion

Klarna – slipped out of top 10, now ranked 102 for Europe’s former No1 Fintech, valuation dropped 85% to US$6.7 billion ?

NuBank – South American Neo Bank, pre-IPO valuation US$45 billion – today $16.8 billion a 63% reduction.

Chime and Revolut – both Neo Banks with unchanged valuations from 2021, given their size relative to NuBank both are much smaller and valuations should be US$8-10 billion given current market valuations.

CheckOut com?– was US$40 billion now US$11 billion down 73%

FTX – gone bust was valued at US$32 billion

The other Fintech in CB Insight list range in size – 9 are over US$10 billion valuation, 23 are $5-10 billion, 73 are $2.5 billion, 72 are $1-2 billion and 110 are under $2 billion (54 are $1 billion).

The loss in value for Fintech Unicorns is 65%, but this will grow as the impact of rapidly rising interest rates and cost of funding stays at new heights, many Fintech’s will be hit by this as their business models don’t allow for passing on costs. ??

There are only 254 global Fintech Unicorns on CB Insights list, a majority are under $2 billion valuation – clearly they all only equal 2 JP Morgan's – yet Fintech is going to sweep banking aside??

JP MORGAN

JP Morgan is 5th ranked bank globally by S&P with assets over US$3.77 Trillion as at Dec 2022 – the first non-Chinese bank in the rankings and one of two US banks in the top 10.

The top 40 banks globally have over $1.1 trillion in assets.

The top 100 global banks have assets $67.5 Trillion ??

Boston Consulting Group (BCG) estimates global retail bank revenues in 2022 will reach US$2.67 Trillion dollars – just think about that for a moment.?That’s $7.3 billion in revenue per day – not bad for a business model about to be run over by outside forces i.e. Fintechs.

The Fintech threat has been written up with breathless excitement by many in the media – often comparing the disruption with Uber in the Taxi industry or AirBnB in Accommodation.?The combined global revenues of taxis/limos and accommodation do not amount to 12% of retail bank revenues.

Now, I see plenty of faults with banks especially in some strategic decisions – but do not underestimate banks, especially retail banks as businesses, generators of revenue and profits.

The name of the game for all financial players has changed very quickly and making profits is now the only goal.

JP Morgan made a splash earlier this year by saying they would invest over US$12 billion in technology to counter FinTech’s was the spin.

JP Morgan does have Fintech investments –

JP Morgan’s tech spend represent less than half a percent of assets, spread across retail, wholesale and institutional banking and around the world. It’s not $12 billion to challenge Fintech’s, who mostly play in the retail banking space and these days are heavily in crypto, Web3, AltFi, Embedded Finance and other vague ‘business opportunities’.??

JP Morgan also suffered major PR damaged with its lawsuit against the founders of Fintech Frank. Purchased in 2021 for US$175 million Frank was supposed to have 4 million college consumers when they only had 300,000 – very embarrassing!! While the PR and image issues are really bad, it’s not financially material to JP Morgan – sure makes you wonder around M&A processes and deal skills??