JPMorgan Chase actively invests in Bitcoin and robotics

[ Abstract ] “Google is coming.” If banks don’t take action, technology companies will take away banking business.

JPMorgan Chase is "aggressively" investing in next-generation technologies such as blockchain and robotics, and investing in these areas is one of the company's "primary focuses" for 2016, according to an internal memo seen by Business Insider.

The lender expects its $9 billion investment to continue in technology in 2016, according to a note to staff from Daniel Pinto, head of JPMorgan's corporate and investment bank.

Blockchain, big data and robots are all investment priorities for JPMorgan Chase. The R&D team is accelerating the development of "market-leading platforms" at the urging of superiors, but JPMorgan Chase did not describe in detail what these platforms refer to.

Here are excerpts from the JPMorgan memo:

“Looking ahead to 2016, one of our main focuses will be to actively explore innovative technologies, an area in which we have been investing. Our R&D team has made significant progress this year and we will give them more autonomy next year to develop market-leading platforms. We have also set up teams to study blockchain technology, big data applications and robotics.”

Blockchain is the software technology underlying Bitcoin that uses complex cryptographic algorithms and a distributed ledger — where transaction records are kept in multiple locations — to regulate, record and guarantee transactions made using Bitcoin.

At present, if you pay someone in pounds, dollars or yuan, your bank contacts other banks to update their account balances. At the end of the day, a large amount of money is transferred between banks through middlemen to ensure that everyone's account balance is accurate.

If you use blockchain technology, all this hassle goes away - you transfer the money directly to the other party's electronic wallet.

Banks are excited about the potential of this technology in traditional financial services. Using the bitcoin blockchain, or a similar system, would allow banks to enjoy the benefits of blockchain in their business transactions.

JPMorgan Chase has been working to bring blockchain to mainstream finance and is the first bank to partner with R3, a startup that brings together the banking industry to develop blockchain industry standards. So far, 42 banks have responded to R3's call.

Last Thursday, the nonprofit software organization Linux Foundation also announced its willingness to work together to promote the development of blockchain technology, and its partners also include JPMorgan Chase.

In his note to staff, Pinto expressed "sentiment and appreciation for your outstanding work", saying 2015 saw "significant changes" in the banking industry and the growth of JPMorgan Chase, driven by increasing investment and emphasis on technology.

He went on to say:

"As an industry leader, we want to drive change in the industry rather than follow the crowd, which is why we have been working with well-known technology companies and some start-ups that have ambitions to promote technological development."

JPMorgan Chase has invested in peer-to-peer lending platform Prosper and mobile payment startup Square.

Pinto's memo echoes a warning JPMorgan CEO Jamie Dimon issued in his annual letter to shareholders in April.

Dimon said, " Google is coming," and if banks don't act, technology companies will take away banking business .

“There are now hundreds of well-funded, talented startups working on alternatives to traditional banking,” Dimon wrote in the letter.

“A lot of the startups you hear about most often are in the lending business, and these companies think that using big data will allow them to effectively help them with credit checks.”

“They are very good at reducing the number of steps in the process, and they can issue loans in minutes, while it always takes us weeks. We will strive to make our service as seamless and competitive as theirs. We will cooperate where necessary, and we will not feel pressured to do so.”

"Rest assured, we have conducted an extremely thorough analysis of our competitors and we are learning from them in developing our own strategy."

The reason for Dimon's warning and JPMorgan's investment in blockchain, big data and robotics is that the banking industry is beginning to feel pressure from the technology industry.

Former Barclays CEO Anthony Jenkins warned earlier this year that the banking industry could be under attack from Ubers, similar to the taxi industry, leading to mass layoffs. Signs of this are already starting to emerge: 11 banks have cut a total of 11% of their staff this year.

According to an analysis by the Financial Times, the financial industry has laid off nearly 100,000 employees this year, which is exactly 10% of the number of employees in the 11 European and American banks that announced layoffs. However, many banks have laid off employees due to reduced customer demand and cost pressure.