The Wall Street Journal and many, many other news outlets have reported Chase Bank has begun the process of closing down Finn, its digital only, or mostly digital-only, version of its core bank. Finn has been in market for only about a year. The purpose of Finn was to see if the bank could attract new customers and deposits under a different name and marketing strategy and with a unique app. Here’s the background on the shut-down:
The nation’s largest bank began informing clients Thursday that it is shutting down Finn, the no-fee banking brand designed to meet the financial needs of younger consumers, and transferring their funds to new Chase checking and savings accounts.
It is a quick about-face for a product JPMorgan hoped would help it lure new customers to its online and mobile banking options, a hot spot of competition among the nation’s banks and financial-technology startups.
We have to give Chase and the handful of other banks credit at least for attempting a new approach. Banks are often chastised for playing it safe and not making big bets. This surely was a “big bet” and closing it down was likely a tough decision.
There is a lot of after-the-fact commenting about why Finn wasn’t a run-away success. Here’s The Journal’s take:
Finn’s strategy differed from other digitally focused banks and startups. It didn’t offer savers rich interest rates to get them to open accounts, a tactic employed by Goldman Sachs Group Inc. and Ally Financial Inc. Because it was started from scratch, Finn didn’t get the boost of an already-active base of digital users, as did fintech startups such as Acorns Grow Inc. when they launched checking accounts.
Yet Finn, which was built on top of the same back-end infrastructure as Chase’s namesake mobile app, allowed its customers to visit Chase tellers, get checks and use its ATMs. As a result, a Finn account looked a lot like a typical Chase account.
This announcement may give other financial institutions a much-needed pause and a reason to think about what they hope to achieve from their digital-only counterparts either launched or in planning stages:
- Is it to attract the same consumers that find value in other digital-only options like Ally, Discover Bank, Chime, etc., etc. Can that be back that up with a great user experience, with high-interest rates on deposits and rich rewards programs to boot?
- Is it to experiment with new technology outside of the existing core processing infrastructure? This is a legitimate endeavor, but the end-game should also be defined. Will this ultimately become the bank’s future infrastructure? Will assets developed in the digital bank be imported to the old system once they have been proven? What defines success for the digital institution?
Mercator Advisory Group recently published a report on the state of digital-only institutions in the U.S. and that can be found here: Digital Consumer Banks in the U.S.: Your Money or Your Wallet.
Overview by Sarah Grotta, Director, Debit And Alternative Products Advisory Service at Mercator Advisory Group
