Why JPMorgan Chase Stock Slumped by Almost 2% Today
Key Points
A well-known business in the financial services sphere is letting go of around 40% of its workforce due to technological advancement.
It might just be starting a trend.
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Is the finance sector about to experience a technological earthquake?
Many investors were shaken by this fear on Friday, and it motivated them to sell out of finance stocks. Even the mighty JPMorgan Chase (NYSE: JPM) couldn't escape the rout, even though its stock fell less precipitously than others with a 1.9% drop on the day.
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The dangers of disruption
These fears aren't new or unexpected, but they were given plenty of oxygen by next-generation payments specialist Block. In a letter to shareholders distributed concurrently with its latest earnings release, Block revealed that it is making significant cuts to its employee rolls.
Image source: Getty Images.
To put numbers on that move, Block will reduce headcount by more than 4,000, leaving the company with a tally of fewer than 6,000 workers.
That letter, attributed to Block founder and CEO Jack Dorsey, stated that modern "intelligence tools" have impacted the building and running of a business. Using such tools, a relatively small team can create and sustain an enterprise as large as Block, best known to consumers for its Cash App financial ecosystem and Square point-of-sale platform.
Be thankful for nimble management
Block isn't a Big Four bank like JPMorgan Chase, however, as companies built on financial transactions, the two are particularly exposed to disruptive forces. For the latter, much will depend on how it embraces technology, and how it'll cope with automated processes that affect the fees and interest rates it can charge.
I don't think the company is under serious and direct threat yet, and -- as it's managed by a talented and perceptive team -- I'm sure it's aware of the risks. I wouldn't sell out of JPMorgan Chase stock because of these disruption fears.
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JPMorgan Chase is an advertising partner of Motley Fool Money. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Block and JPMorgan Chase. The Motley Fool has a disclosure policy.
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