JPMorgan Exec: Payments Systems Are the Future of Fintech

JPMorgan’s head of innovation and corporate development said banks should focus on payments systems


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key takeaways

  • More digitized payment models are going to continue to emerge, JPMorgan analysts estimate
  • “Digital transformation is not a sprint, it’s a marathon, but it also has no finish line,” a JPMorgan Jeremy Balkin said

JPMorgan Chase is amping up its investments in payment processors, and — according to the global bank’s head of innovation and corporate development — everyone else in the financial services industry should follow suit. 

“Continue to focus on payments, because I think that’s a space that’s borderless,” Jeremy Balkin said at the Mediterranean Business Summit in New York Tuesday.

Earlier this year, JPMorgan moved to acquire around 49% of Athens-based payments services provider Viva Wallet. In 2021, the bank made nearly 20 total investments in the fintech space, including acquiring a 75% stake in Volkswagen Payments, a platform designed for the automotive industry. 

“I think payments…[are] the natural tip of the spear for financial services as it relates to intersecting with the new world of fintech,” Balkin said. “I think it’s the ideal space to collaborate and to build your business models to move money faster, safely, more efficiently.” 

Banks with the ability to custody the digital assets of clients and be competitive in the landscape are going to be the most successful in coming years, he added. 

JPMorgan analysts estimate tech modernization efforts will top $2.8 billion in 2022, a billion dollar increase from 2019. This increase in technology infrastructure will lead to more than $5 trillion in payments, the bank said in materials released as part of its 2022 investor day.

“Winning in payments is our strategic imperative,” analysts wrote. 

Payments service providers such as PayPal and Block have “done an incredible job penetrating the consumer market,” Balkin said, adding, “the question is what happens in this new environment of interest rates, the cost of capital is not free.” 

Balkin expects ample consolidation in payments to come, and the biggest companies are likely going to continue to thrive — akin to Amazon’s rise during the dot-com bubble. 

Digital banking is only going to continue ramping up, Balkin said, meaning the focus on virtual is more important than ever. In 2021, more than 65% of JPMorgan accounts were opened online, analysts said. 

“Digital transformation is not a sprint, it’s a marathon, but it also has no finish line, it’s perpetual, it has to continue,” Balkin said.

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