Dive Brief:

• JPMorgan Chase will launch a digital bank in the U.K. in the "coming months," the company said Wednesday in a press release — the bank's first public acknowledgment of a strategy that had been rumored as far back as June 2019.
• The digital offering will debut with a mobile checking account this year and may expand into credit cards, mortgages and auto loans, Bloomberg and CNBC reported Wednesday, citing people briefed on the plans.
• JPMorgan has been testing its checking account offering among a small group of people and plans to pilot it with some U.K.-based employees and their families and friends in the next few weeks, a source told Bloomberg.

Dive Insight:

Launching a digital bank overseas represents a path to expansion for a bank that is limited in that regard domestically. Regulations prohibit JPMorgan from acquiring additional U.S. retail banks because it already holds more than 10% of the country's deposits.

It wouldn't be the first U.S. bank to create a digital footprint in the U.K. Goldman Sachs's digital bank Marcus has attracted more than 500,000 customers in the country since it launched there in 2018. Marcus last summer had to stop taking new applications for savings accounts to keep its deposits under a £25 billion threshold. Exceeding this threshold would force Marcus, under U.K. regulations, to become a separate legal entity with its own board and limit capital sharing with the rest of Goldman.

"We want to provide customers with a new banking choice — one that will enable them to benefit from a simple and exceptional banking experience, built on the significant capabilities of JPMorgan Chase," Gordon Smith, JPMorgan's CEO of consumer and community banking, said in Wednesday's release. "The U.K. has a vibrant and highly competitive consumer banking marketplace, which is why we've designed the bank from scratch to specifically meet the needs of customers here."

A U.K.-based subsidiary of JPMorgan Chase is licensed to operate the business, the bank said, putting to rest speculation that it was interested in acquiring U.K. digital bank Starling for its banking license and already-established customer base.

"Our decision to launch a digital retail bank in the U.K. is a milestone, introducing British consumers to our retail products for the first time," JPMorgan Co-President Daniel Pinto said in Wednesday's release. "This new endeavour underscores our commitment to a country where we have deep roots, thousands of employees and offices established for over 160 years."

The U.K. has served as a launchpad for several digital banks, including Monzo, Revolut and Starling. But more established retail banks have faltered with their digital offerings there. NatWest, formerly the Royal bank of Scotland, closed its digital bank Bó in May 2020, six months after it launched. CEO Alison Rose defended the effort, saying, "Bó hasn't failed" — rather, it was folded into NatWest's digital business bank, Mettle.

Challengers, too, have had to pull back from the U.K. German neobank N26 cited Brexit in its decision last year to abandon the market and close all of its U.K.-based accounts.

JPMorgan has taken its share of knocks in previous digital bank rollouts. It shuttered its U.S.-based digital-only bank Finn in 2019, after just a year, saying Finn's target demographic — millennials — didn't necessarily want a separate digital experience from what Chase could provide.

JPMorgan's U.K. digital bank project — code-named "Dynamo," according to Bloomberg — has attracted 400 engineers, customer service representatives and other employees, with more hires expected, the bank said. Sanoke Viswanathan, previously chief administrative officer and head of strategy in JPMorgan's corporate and investment bank, will serve as the digital bank's CEO.

The bank, in its release, promised a "new take" on its digital products. But JPMorgan's branchless approach in Britain runs counter to its strategy in the U.S., where it says it will expand to have a brick-and-mortar presence in 48 states by midyear. At the same time, CEO Jamie Dimon, in an earnings call this month, acknowledged "the world needs less branches."

Nearly two-thirds of accounts in expansion markets are being opened digitally, JPMorgan CFO Jennifer Piepszak said at a recent investor conference, according to Bloomberg.

Dimon, about a decade ago, considered expanding retail operations overseas by buying a rival. But he said the bank would lose money "for the rest of our lives" with a branch-heavy footprint, Bloomberg reported.

Sky News, citing technology industry sources, reported in August that JPMorgan's U.K. digital bank could roll out in the first quarter of 2021. The network reported in February 2020 that the bank was in talks with U.K. regulators to launch a range of savings and loan products in the country.