In his annual letter to shareholders this week, JP Morgan CEO Jamie Dimon showed his concerned as he feels the traditional banking world is facing huge competition from Bitcoin. He warned investors and those in the banking industry that “Silicon Valley is coming.” This definitely is important as he runs America’s biggest bank, knows what he talks about.
Jamie Dimon says that there are hundreds of startups with a lot of brains and money working on various alternatives to traditional banking. However, the ones that investors read about most are in the lending business, whereby the firms can lend to individuals and small businesses very quickly and — these entities believe — effectively by using Big Data to enhance credit underwriting.
Talking about Bitcoin in the latest shareholder letter, Dimon even went so far as to acknowledge the competitive threat posed by Bitcoin and other payment alternatives. He says that investors have read about Bitcoin, merchants building their own networks, PayPal and PayPal look-alikes.
Adding further he says in the letter that payments are a critical business for the company and it is quite good at it; however, according to him there is much for us to learn in terms of real-time systems, better encryption techniques, and reduction of costs and ‘pain points’ for customers. His indication definitely is towards Bitcoin becoming a one-stop fast global transaction.
Bitcoin is emerging as a major challenge for traditional banking services providers; however, it does not aim to replace them; rather, it aims to work side by side. A major focus area of Bitcoin companies is to provide banking services to unbanked sections of people living in the faraway lands of Africa and Asia as well as Latin America.
Bitcoin and Tech Startups are Reducing ‘Pain Points’
No doubt a number of startups have come up over the last couple of years that are transforming the way transactions are being carried out; however, it is still too early to predict that they will replace the traditional banking. Nonetheless, Dimon admits that they are very good at reducing the ‘pain points’ in that they can make loans in minutes, which might take banks weeks.
He is indicating that the company is going to work hard to make its services as seamless and competitive as the ones from Bitcoin and other technical startups that are transforming the way transactions are being carried out.
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