‘We’re living in the golden age of payments’: How JPMorgan Chase is integrating payments into banking

JPMorgan Chase is waking up to the fact that, like banking and technology, banking and payments are one and the same. The company made payments — from consumer peer-to-peer transactions to its correspondent banking business — one of the main focuses of its Investor Day presentation Tuesday morning given by chief financial officer Marianne Lake, who said payments is a natural extension of the digital banking conversation. “Digital and payments strategies transcend all of our businesses,” she said. “At it’s most basic level, if you think about a checking account it’s not just a checking account it’s actually a payments account. Payments drive significant value to our core franchise, retail and operating deposits.” JPMorgan has been ramping up its payments investments and partnerships over the last two years. In 2016 it launched its own digital wallet, Chase Pay and shortly after partnered with order-and-pay-ahead app LevelUp. In May 2017 it co-led a $50 million investment of debt and equity in LevelUp. Midway through the year it brought its peer-to-peer payments product, Chase Quick Pay (launched in 2010), onto Early Warning Services’ Zelle network. In September the bank partnered with Bill.com to allow its customers to send and receive electronic payments and invoices; a month later it co-led a $100 million investment in the company. Around the same time it spent $400 million to acquire small business payments company WePay. It’s the only U.S. bank with scalable businesses in every major payments vertical, allowing it to serve “the 360-degree need of customers” in every segment, Lake said. That may be, but there’s an emergence in other markets like China of payments that are not necessarily linked to the traditional payments networks and are creating critical mass and evolving upward quickly, like WeChat Pay and Alipay. JPMorgan is well positioned to capture a significant share of the traditional payments market but not very well positioned to go after non-traditional payments alternatives, said Thad Peterson, a senior analyst at Aite. “Companies like JPMC will have a real hard time either integrating or competing with those because there’s not much of an economic advantage for an issuer like JPMC to participate with something like Alipay,” he said.

Historically, banking and payments have been separate, but related. The same can be said for technology and digital functions, which banks now recognize as elements they need to deploy across their entire organizations and not just within the tech and digital departments. The young fintech industry has demonstrated the power of design thinking to differentiate user experiences and drive new levels of customer engagement, said Matt Kane, CEO of Chase Merchant Services. With everything becoming more and more digital— not just in banking — JPMorgan, which has always ben a scale-level player, has spent the last two years coming to terms with the fact that the digital element is the key to maintaining deeply engaged relationships with customers. “We’re living in the golden age of payments," Kane said. "Historically digital was the gearhead in the back room that took care of the website. The banks have realized that and are rapidly catching up as we adopt the principles around design thinking. You see that same analog in payments… it has become an integral component of the banks’ offerings.” JPMorgan sees the payments opportunity as a continuum. It starts on the consumer side with checking and savings accounts and credit cards and payment methods — peer-to-peer, consumer-to-business, digital wallets, direct marketing relationships with individual merchants. In the wholesale space the bank accepts payments from merchants and processes credit cards for clients of all sizes. Once it has the money it helps clients move it across the globe, sometimes in different currencies, sometimes in real time. On this continnum, every company, even non-banks, are competitors. The continuum is “definitionally, soup-to-nuts the payments industry,” Kane said. “So we are definitively in competition with everyone in the payments space.”