There are very few chief executive officers that the market pays attention to more than Jamie Dimon, the esteemed leader of JPMorgan Chase (JPM -0.11%), the largest U.S. bank by assets. So, as Dimon has intensified his calls on the growing competition from rival fintech companies, and at times what he calls their "unfair" advantages, investors may have been worried about the future of more traditional banks. But Dimon over the years has also vowed to fight hard, especially in the increasingly competitive world of payments.
Now, the longtime CEO seems to be making good on that promise with JPMorgan's recent fintech acquisitions. Let's take a look at these recent acquisitions and how they could help the bank ward off competition from the likes of large fintech payment processors like Stripe and Plaid.
The latest fintech acquisition
Banks are long past just making loans and collecting deposits. The large players like JPMorgan are now big investment bankers and wealth management players, and are lurking behind the scenes in the payments industry.
Image source: JPMorgan Chase.
As a bank that is good at most aspects of banking, JPMorgan Chase has naturally built the world's largest payments franchise. This business includes treasury services, merchant services, and trade. For instance, JPMorgan can help merchants accept debit and credit card payment transactions at the point of sale or online.
JPMorgan's payments business generated nearly $10 billion of revenue in 2021, has 29,000 clients, and has gathered roughly $800 billion of deposits. Management also said at a presentation in May to investors and analysts that it is targeting double-digit revenue growth and pretax income growth over the long term.
But despite the success of the payments group, Takis Georgakopoulos, JPMorgan's head of payments, acknowledged at the bank's May presentation that the bank's performance in e-commerce was underwhelming in 2021, with the bank not producing revenue growth. Georgakopoulos attributed this to two things: low penetration in more profitable market segments and not having the same breadth of services as several competitors in the fintech market.
To help solve this problem, JPMorgan has acquired several fintech companies specializing in payments, including Viva Wallet and Volkswagen Financial Services. Its latest and most recent acquisition, Renovite, is a cloud-based payments company that has six core products that can help merchants, banks, and acquirers deal with all aspects of the payments process from clearing and settlement, to consumer authentication, to fraud detection, to delivering service through ATMs.
"As the Renovite platform integrates with J.P. Morgan Payments, merchant acquiring clients will be able to accept more methods of payments around the globe to help grow their business," Mike Blandina, JPMorgan's global head of payments technology, said in a statement.
Expect JPMorgan to invest heavily
Fintech companies have certainly challenged large traditional banks more than anyone could have ever thought possible. But having now guided JPMorgan through two large financial crises and having built the bank into the largest in the U.S., Dimon is a keen planner for the future.
Dimon can also operate from a point of strength inside an immensely profitable bank, and therefore has plenty of resources at his disposal. Earlier this year, much to the displeasure of analysts and investors, JPMorgan Chase estimated that the bank's expenses would rise 8.6%, or more than $6 billion, from 2021. Roughly $3.5 billion of that is to invest back into the business.
You'd better believe Dimon is pouring a ton of money into the bank's technology and payments business, and will also make acquisitions when he sees an opportunity. I don't necessarily know who will win the payments battle, but with its resources and ability to build and buy payments solutions, JPMorgan is not a bank I would bet against.
