Depositors put ‘digital capability’ on par with yields: Inside JPM's 3Q

Perhaps it’s not just higher yields that consumers want on their savings accounts.

During a conference call Thursday to discuss JPMorgan Chase’s third-quarter results, Chief Financial Officer Marianne Lake said that consumers are weighing a “more balanced scorecard” of factors, including high-tech digital services, when considering where to park their cash.

“Customer satisfaction, the suite of products and simplicity, the digital and online offerings, as well as the safety, security and the brand, all matter,” Lake said. “Price is a factor, but not the only one.”

The banking industry, of course, is closely watching for signs of heightened price competition on deposits. But, for the most part, JPMorgan has not yet begun to pass along the benefit of higher rates to consumers.

Consumer preferences are simply more complex than what many assume, according to Lake, who suggested that savers want better technology just as much as they want better rates.

“Having a leading digital capability is critical to our customer franchise,” Lake said. “It will, in all likelihood, have an impact on the stickiness of deposits because consumers value that kind of convenience very highly.”

During the third quarter, deposits in JPMorgan’s consumer and community bank rose 9% to $630.4 billion. Active digital customers — a measure of web and mobile log-ins — increased 6% to 46.3 billion.

Notably, JPMorgan recently surpassed rival Bank of America as the bank with the largest share of U.S. deposits, according to the Federal Deposit Insurance Corp. JPMorgan holds 11.1% of U.S. deposits, and B of A holds 10.9%, FDIC data shows.

Lake’s comments were meant to allay lingering worries that the company’s bevy of high-tech consumers may head for the exits once rival banks begin boosting deposit rates.

Technology has advanced rapidly since the last time the Fed raised rates, in the early 2000s, a time when flip phones were popular and mobile banking sounded futuristic. But with advances in bank technology, consumers can now more easily open accounts and move money between banks, to chase higher rates.

Lake suggested those concerns may be slightly overblown.

“The reality is, there have always been two different camps on the reprice theories for consumers,” Lake said, noting that the New York company is “seeing, to a degree” that having better digital features encourages customers to stick around.

Despite the surge in mobile customers, however, Lake emphasized during the call that the company’s branch network continues to play an integral role in attracting deposits.

Notably, 75% of new consumer deposits added during the quarter came from customers who are “still using our branches,” Lake said. She added that, on average, customers visit branches “multiple times” per quarter.

The company continually prunes its branch network, Lake said, adding branches in some locations while closing them in others. As of Sept. 30, total branches at the New York company had declined 3% to 5,174.

JPMorgan has said in recent years that it plans to expand its branch network high-growth cities such as San Francisco and Miami. The company has also begun eyeing expansion into new geographic markets, executives said this summer. It has extensive operations in 25 states, such as New York, Texas and the West Coast, though its footprint currently excludes large portions of the Mid-Atlantic and upper Midwest.

If consumers unexpectedly stop visiting the branches and conduct most of their business online, JPMorgan will “respond accordingly,” Lake said.

But don’t expect that to happen anytime soon.

“I know it sounds like old news, but it’s still new news, current news: The branch distribution network matters,” Lake said.