Chasing the Advantage

JPMorgan Chase and Porter’s Five Forces

On paper, JPMorgan Chase looks like it has already won. It is the largest bank in the United States, with a huge customer base, a trusted brand built over more than a century, and a level of scale almost no competitor can match. So when I read that the company plans to spend close to $20 billion a year on technology — more than many actual tech companies — I had to ask why a firm this dominant would spend like it is fighting for its life.

Porter’s Five Forces gave me a way to make sense of that question. It is a well-known framework in business strategy, and what stood out to me about it is that it looks past what happens inside a company and focuses on the outside pressures that shape an entire industry. A firm can be well-run, profitable, and respected and still be exposed to forces it does not fully control: competitors, customers, suppliers, new entrants, and substitutes. JPMorgan is a good example of a company that looks untouchable from the inside but still has real reasons to watch what is happening around it.

Porter’s Five Forces applied to JPMorgan Chase. The barriers that keep new banks out do nothing to stop the fintech substitutes attacking from below.

A fortress that is hard to attack

The first force that explains JPMorgan’s strength is the threat of new entrants, and in traditional banking that threat is very low. It is not easy to start a major bank. A new company would need regulatory approval, a banking charter, strong capital levels, customer trust, and the ability to attract deposits. Those are enormous barriers. JPMorgan already has all of them, along with thousands of branches and a national presence that would take a newcomer decades and billions of dollars to build. Because of that, the bank is well protected from anyone trying to enter the industry as a traditional bank, and this is a big part of why it has stayed so profitable for so long.

The threat that walks around the wall

But the same framework also helped me see why JPMorgan cannot relax. The real danger may not be new banks at all. It may be substitutes. A substitute is a product or service from outside the industry that meets the same customer need in a different way, and the interesting thing about substitutes is that they do not have to play by the industry’s rules. Fintech companies are a perfect example. Most of them are not trying to become full-service banks, so they never have to climb the regulatory wall that protects JPMorgan. Instead, they walk around it — offering payment apps, online lending, investing tools, and digital savings accounts without ever needing a charter.

And they are doing this where banks make some of their best money. In unsecured personal loans, for instance, fintech lenders now account for about 42% of new originations, up from roughly one-third just a year earlier, and they hold more than half of the total balances in that market. That tells me substitutes are not only a future risk. In some products, they are already the main players.

This matters because banking is about more than holding deposits. A customer today might still keep a checking account with a major bank but use one app to send money, another company for a personal loan, and a third platform for investing. JPMorgan may not lose that customer completely, but it can lose pieces of the relationship over time, and those pieces add up.

Why customers have more power now

This connects to another force: the bargaining power of buyers. When customers have more options, they gain more power. In the past, switching banks felt like a hassle. Today, customers can compare rates, move money, apply for loans, and manage almost everything from their phones in a few minutes. That collapse in switching costs means convenience, speed, and technology matter far more than they used to. If JPMorgan does not deliver a modern experience, customers now have somewhere else to go.

What the $20 billion is really for

This is where the spending starts to make sense. JPMorgan is not pouring money into technology and artificial intelligence simply because it is fashionable. It is doing it because the external environment is changing under its feet. The bank’s own leadership has been blunt about this. CEO Jamie Dimon has described the competitive environment as the toughest in at least 20 years and admitted that technology competitors have “badly beat” the bank in the past. If fintech firms compete on speed, personalization, and convenience, JPMorgan has to answer in those same areas. Its size gives it the resources to try, but size alone does not guarantee that customers will stay.

My view

My view is that JPMorgan is still in a very strong position, and the evidence backs that up. The bank has actually been gaining ground rather than losing it: its share of U.S. retail deposits has climbed in recent years, and it is openly targeting an even larger share going forward. So this is not a story about a fading giant. It is a story about a dominant company that is still growing.

At the same time, Porter’s Five Forces shows why JPMorgan cannot treat that strength as permanent. The most serious threat probably will not come from another large bank trying to copy it. It will come from companies that offer financial services in a simpler, faster, or more specialized way, and that chip away at the relationship one product at a time. JPMorgan looks likely to win the broad battle for the customer while quietly giving up ground at the edges.

That is what makes the company so interesting to study. Porter’s Five Forces helps explain how JPMorgan can be powerful and vulnerable at the same time. The threat of new entrants is low, but the threat of substitutes is growing. The fortress is still standing, and it is still the strongest one in American banking. But the smartest competitors are not trying to break through its walls. They are building something different next door — and that is the challenge JPMorgan’s strategy really has to answer.

Sources

American Banker — JPMorgan invests for new age of competition amid AI fears: https://www.americanbanker.com/news/jpmorgan-invests-for-new-age-of-competition-amid-ai-fears

AI News — JPMorgan expands AI investment as tech spending nears $20B: https://www.artificialintelligence-news.com/news/jpmorgan-expands-ai-investment/

MLQ.ai — JPMorgan Increases Tech Spending to Nearly $20 Billion: https://mlq.ai/news/jpmorgan-increases-tech-spending-to-nearly-20-billion-amid-ai-driven-transformation/

CNBC — Personal loans surge amid affordability struggles (fintech origination share, via TransUnion): https://www.cnbc.com/2026/02/20/subprime-borrowers-personal-loans.html

The Financial Brand — Chase sets ambitious consumer banking growth at Investor Day (retail deposit share): https://thefinancialbrand.com/news/banking-trends-strategies/chase-sets-ambitious-consumer-banking-growth-at-investor-day-189444