On the eventful day of the 31st of December, 2021, JPMorgan Chase—a global leader in financial services—created a new milestone for the banking goliath – it disclosed an asset size of $3.11 trillion. The firm’s roots can be traced to 1799 when its earliest predecessor institution The Manhattan Company was founded. In 1871, John Pierpont Morgan – in a partnership with Anthony Drexel – established the Drexel, Morgan and Co. in New York; which was rechristened J.P. Morgan and Co. in 1895. The financial institution acquired its present name of JPMorgan Chase and Co. in 2000 when it merged with Chase Manhattan. In this post, we take a closer look at the banking giant’s unique investment and acquisition strategy through the years in a bid to battle FinTechs at their own game.
Tech Deal Making Contours
“We have to fight. We have to move quicker. We have got to kill our own bureaucracies.” — Jamie Dimon, JPMorgan Chase
If we look at the contours of JPMorgan Chase, we can surely see signs of the commandment set by the CEO. The urgency, the swiftness, and the diversity of FinTech investments by the firm signal the desire to engage in a multi-pronged fight with the disruptive trends that are sweeping the banking industry.
JPMorgan Chase’s courtship with FinTechs can be traced back to 2017, when it acquired WePay, to integrate payments into the software used by small businesses. Since then, the US’ largest bank by asset size has been on an investment spree across the globe. In 2019, the firm acquired a minority stake in UK workplace pension provider Smart Pension, and invested in India-based GlobalPayEx to improve B2B payments. In a bid to strengthen its foothold on its own turf, it acquired InstaMeds for more than $500 million and made strategic investments in accounting platform FreshBooks and teen-focused neobank Greenlight.
In 2020, JPMorgan Chase focused on diversifying its portfolio. The banking giant backed Arcesium, an investment management technology and professional services firm; and along with Goldman Sachs, Bank of America, Morgan Stanley, and Fidelity Investments, participated in the strategic financing of low-cost stock exchange Members Exchange. This was soon followed by a $4.3 million investment in cash management startup Trovata; and along with Citi, Deutsche Bank, and HSBC, the firm infused a total of $20.5 million in Proxymity – the digital investor communication platform developed within Citi’s Institutional Clients Group. Not only that, but JPMorgan Chase also acquired a minority stake in Brazilian FinTech FitBank, and partnered with Marqeta to launch virtual credit cards.
The firm made one of its most significant alliances when it participated in supply chain outfit Taulia’s financing round, which was ensued by a $3.8 billion credit facility offer the following year. It invested in UK-based Icon Solutions, which advises and provides technology to banks to help them overhaul their digital payments systems. Furthermore, it led AcessFinTech’s Series B funding round, along with Deutsche Bank, Citi, Goldman Sachs. J.P. Morgan ended the year on a high note – in December it announced the acquisition of 55ip, a FinTech with proprietary capabilities empowering financial advisors to deliver tax-smart investment strategies at scale.
2021: Global FinTech Investment Playbook
Looking at the FinTech investments of JPMorgan Chase last year, we can see that it is driven by a dual-objective – the first is to extend its product suite by bringing niche products in the mix to serve the long tail of traditionally underserved customer segments and deliver on the heightened customer expectations. The second is to join forces with global FinTechs and piggyback their growth in international markets without attracting regulatory scrutiny in the US, where the bank already enjoys a significant market share.
JPMorgan Chase went on an absolute buying spree in 2021, finalizing more than 30 acquisitions and investments in order to plug any kind of holes left in its offerings. It started off the year with the acquisition of cxLoyalty Group Holdings, a leading loyalty and technology solutions company; and bought a 10% stake in China Merchants Bank for $410 million. It participated in the Series C funding round of digital mortgage platform Roostify, raising $32 million; while also investing in Zanbato and PPRO, a leading provider of local payments infrastructure.
In April, the bank teamed up with India-based BillDesk for an online payments partnership; and participated in Series B and Series A funding rounds in The Tifin Group and Candex respectively. The months of June and September saw a flurry of deals as the banking behemoth announced the acquisition of UK-based Nutmeg – a digital wealth management platform; Campbell Global – a leading player in forest management and timberland investing; OpenInvest – an ESG-focused investment platform; and Frank – the fastest-growing college financial planning platform. Correspondingly, JPMorgan Chase entered an agreement to acquire a 40% and 75% stake in C6 Bank and Volkswagen Financial Services respectively.
In the final quarter of the year, the banking giant embarked to replace its retail core banking system in the US with technology from Thought Machine and subsequently invested $200 million in the core banking provider’s Series C funding round. Soon after its investment in GeoWealth, the firm collaborated with Even, enabling it to offer real-time payments for the US workforce.
2022: The Momentum Grows
According to CEO Jamie Dimon, JPMorgan Chase would be even more aggressive in its acquisition strategy. This year, the bank has been quick to grab the headlines for its already disclosed investments in blockchain infrastructure firm Blockdaemon, and Irish FinTech Wayflyer – a revenue-based financing platform for e-commerce merchants. The investment bank additionally acquired a 49% stake in Greek FinTech Viva Wallet.
Fierce competition from FinTech players, as well as US tech giants, has been pivotal to the firm’s ambitious investment approach. However, the financial institution is banking on its plethora of resources to stay ahead of the competition, which has silently reflected in Dimon’s statement – “I expect to win, so help me God.”