JPMorgan is leveraging the buy, build, partner / invest framework to grow Chase Merchant Services.
JPMorgan’s Chase Merchant Services is the bank’s payment processing business. The platform enables merchants to accept payments across all channels: in-store, online, or on-the-go.
Today, Chase Merchant Services is the second-biggest US processor of card payments for merchants, behind only First Data Corp. In Q3’18, Chase processed $344B in merchant transactions, a 14% year-over-year increase.
In merchant services, payments has become a gateway to other financial services including loans, payroll management, and customer rewards. Successfully executing in payments will allow JPMorgan to substantially grow the rest of its merchant services business.
The tech behind Chase Merchant Services (Chase Paymentech) was developed internally — JPM has been granted 95 “payment systems” patents since 2011. But more recently, JPMorgan has been making both internal and external investments to scale the business.
JPMorgan leverages the buy, build, partner / invest framework to scale its payments business:
- Buy: In October 2017, JPMorgan acquired online payments company WePay for up to $400M. Following the acquisition, WePay’s first product was Chase Pay, an e-commerce checkout button. This was quickly followed by a similar mobile solution enabling digital stores to accept payments on the Chase network.
- Build: JPMorgan is building user-friendly applications to increase consumer adoption of Chase Paymentech, including Chase Pay, the bank’s mobile wallet. Additionally, JPMorgan announced plans to create a “fintech office” in Silicon Valley by 2020. JPMorgan hopes this office will attract top tech talent to help the bank build e-commerce payment solutions.
- Partner: JPMorgan uses a 2-pronged partnership strategy to grow Chase Merchant Services. On one hand, it partners with high frequency transaction businesses like Kroger and Meijer. On the other hand, it also works with digital payment processors like Braintree and BigCommerce.
- Invest: JPMorgan strategically invests in payment companies to increase the number of merchant transactions processed. These investments also allow JPM to integrate outside solutions into its existing services. For example, the bank invested in restaurant payments startup LevelUp, and then integrated LevelUp’s order-ahead software into Chase Pay.
In the future, expect JPMorgan to continue investing in its e-commerce payment solutions through all possible channels.