Deep in Jamie Dimon’s 66-page letter to JPMorgan Chase & Co. shareholders last year lies a chart: 11 ways being a bank is costlier than being a fintech, from deposit insurance to higher capital and liquidity requirements. The longtime chief executive officer tallied tens of billions of dollars that he says such rules cost the bank over the past decade.
Dimon has for years griped about what he calls an unfair playing field. He isn’t alone: Big banks and the powerful lobbying groups representing them are readying a fight on multiple fronts, in what’s already shaping up as a definitive year for the rivalry between traditional banks and their tech competition.
In one example of the grip fintech firms have developed on consumers, PayPal’s Venmo boasted almost four times as many monthly average app users as Bank of America, JPMorgan, and Wells Fargo combined in 2021, according to data from Apptopia. It’s “death by a thousand cuts,” says David Donovan, who leads the Americas global financial-services practice for Publicis Sapient. Banks are “fighting against a bunch of different little companies that are looking at a piece of the banking franchise, so that’s the big threat.”
The Bank Policy Institute, which represents more than 40 of the largest banks, and other lobbyists want to convince policymakers that nonbanks are getting away with “regulatory arbitrage,” avoiding requirements traditional banks face. In his shareholder letter, Dimon mentioned one peeve: Some fintechs can collect higher income on the debit card swipe fees paid by merchants, because of legal caps on those fees faced by big banks.
Banks are bracing for tougher regulation from the Biden administration, but they hope stricter rules will apply to fintech as well. That may be a good bet. Acting Comptroller of the Currency Michael Hsu expressed concern at a fintech conference late last year that fintech firms are “reassembling the three legs of banking”—deposits, loans, and payments—“but outside of the bank regulatory perimeter.”
Banks increasingly want in on the crypto party, but they also want the digital currency market regulated. Such things as stablecoins, tokens whose value is supposed to be pegged to the dollar or other currencies, and decentralized finance, which lets people earn interest on their crypto, mimic features of traditional bank deposits without the necessary safety rails, banks say.
Fintechs often point out that banks benefit from the current regulatory system, using the high cost of compliance to discourage competition and protect their turf from upstarts. Fintech firms are trying to gain access to their own accounts at the Federal Reserve, something currently limited to traditional banks. Fed accounts would give fintechs access to low-cost payments systems they normally must go through banks to use, causing lost business for banks and opening another frontier for direct competition. Bank lobbyists say it’s too risky to let companies that are less strictly regulated for safety and soundness to tap directly into a payments system.
Fintechs now have their own trade groups advocating for them in Washington, such as the Financial Technology Association. Bank lobbyists, meanwhile, are focusing on such agencies as the Treasury Department, the Fed, and the Consumer Financial Protection Bureau, according to people with knowledge of their strategy, because they seem most ready to move on these issues. In December a key group of top financial regulators said that it could act to address stablecoins if Congress doesn’t.
Read next: Is SEC’s Gary Gensler the Skunk at the Fintech Party or the Adult in the Room?