One reason I don't think JP Morgan or traditional banks can compete effectively with smaller startups is the regulatory framework that they operate in. New star

One reason I don't think JP Morgan or traditional banks can compete effectively with smaller startups is the regulatory framework that they operate in. New startups can structure themselves outside this framework and be more nimble. For instance, Lending Club essentially passes through all credit risk to its investors with its assets and liabilities perfectly matched. So every dollar loss in loans is a dollar less to the holders of the notes. If a bank tried to have this sort of structure, it would be incredibly leveraged and would require a large amount of capital reserves. There was a great Bloomberg article addressing just this [0] [0] http://www.bloombergview.com/articles/2014-08-27/lending-club-can-be-a-better-bank-than-the-banks http://www.bloombergview.com/articles/2014-08-27/lending-clu...