What will J.P. Morgan’s Daniel Pinto be watching next year? ESG opportunities for clients and whether or not upstart digital banks like Revolut and Monzo grow into formidable competitors.
“I don’t go to a single client meeting where this (ESG) issue doesn’t come up in some form,” Pinto, JPMorgan’s co-president and co-chief operating officer, said last week on CNBC in response to question about what will dominate Davos talks next month.
“It’s not just one bank or one sector, it’s all the sectors,” he said. “It’s not a box-ticking exercise, this is real. This trend will continue to gain momentum and be exponentially higher over the next 10 years.”
Even though social impact investing has been seen as a niche market for years, more traditional banks and institutions like Bank of America are recognizing consumer demand and are looking to broaden their offerings in response.
ESG principles will emerge as an important criteria for identifying sustainable businesses, Pinto said in the interview.
“Either you are socially and environmentally responsible or you are not, I think that this is the world we are heading towards,” he said. “Asset management companies are becoming more selective on what they do and what they don’t do. And the banks are also more selective in how we deal with certain sectors that are under scrutiny.”
He said that some companies may “really struggle to finance themselves, their cost of capital will go to the sky and they may not exist going forward,” as a result of this additional attention and criteria.
In his role as co-president, Pinto’s mandate is to “work closely with the CEO and the board to identify and pursue critical firmwide opportunities,” according to his official bio. He’s also on the Executive Committee of the World Business Council for Sustainable Development.
Pinto certainly sees big tech companies as competitors, saying their foray into financial world is worth paying attention to. Over the past year, Facebook, Google and even Uber showed interest or expanded offerings in the space.
“I think it’s only a matter of time before they participate in financial services in a bigger way,” he noted. “We have to assume that they will be real competitors.”
J.P. Morgan co-president is also watching fintech startups like Monzo, Revolut and Chime closely, noting their biggest challenge is reaching profitability beyond just new client acquisition.
“Their valuations are going up because the number of clients is rising, but they will need to show that they can convert clients into primary accounts and profitable relationships,” he told CNBC. “The other issue to pay attention to is infrastructure and controls. As some digital banks gain in size and significance, I expect that they will be held to the same high standards of traditional retail banks.”
Pinto hasn’t quite dismissed Facebook’s Libra project, and J.P. Morgan was the first major bank to unveil its own digital currency project JPM Coin at the start of 2019. JPM Coin is based on Blockchain and is aimed to enable instant transfer of payments between institutional clients.
In fact, J.P. Morgan has been one of the digital leaders among the big banks, with reports swirling about plans to build a “startup within a corporation that will be run independently and entirely separately from J.P. Morgan’s existing technology and businesses.”
It’s clear that the giant lender is monitoring the competition.
“The last thing you want is to feel invincible and then realize that you should have paid more attention.”Earlier this year, J.P. Morgan invested in 10x Future Technologies, a U.K. fintech startup, helping “banks to develop their own artificial intelligence and machine-learning capabilities.”