JPMorgan (JPM) fintech deal to amass Renovite to combat Stripe and Block

The main entrance at JPMorgan’s headquarters in New York City.

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JPMorgan Chase has agreed to acquire a payments startup called Renovite to fend off threats from fintech companies like Stripe and Block, CNBC has learned.

The bank, a major player in global payments, said its acquisition of Fremont, California-based Renovite will accelerate its ability to launch new offerings for merchants.

While JPMorgan is the world’s largest provider of commerce services by transaction volume, fast-growing newcomers like Stripe and Block have climbed the rankings in recent years thanks to booming e-commerce sales and the proliferation of new payment methods. Merchant acquirers are key behind-the-scenes vendors that enable sellers to accept in-person and online payments and keep a small stake in each transaction.

Though JPMorgan operates a payments juggernaut that processes more than $9 trillion a day across multiple businesses, JPMorgan’s merchant acquiring revenue has faltered over the past year in part because it lagged and lagged in some e-commerce segments offered services than some fintech competitors, Global Payments Chief Takis Georgakopoulos told investors in a May conference.

“Changing this image is a big story behind our investments,” Georgakopoulos vowed.

shopping spree

The acquisition of Renovite, first reported by CNBC, is the latest in a series of fintech deals struck under CEO Jamie Dimon. Since late 2020, JPMorgan has acquired at least five startups, ranging from an ESG investment platform to a UK-based roboadvisor, in addition to a number of smaller fintech investments.

Dimon has repeatedly sounded the alarm about the threat fintech players pose to traditional banks, particularly in highly competitive payments.

Fintech players have used merchant payment processing as a wedge to help them build ecosystems that have garnered staggering reviews. They were also generally more flexible in activating new payment methods such as offers from Klarna and Affirm.

Dimon has been forced to defend his bank’s rising spending this year as it invests billions of dollars in technology amid a 25% stock plunge on recession fears.

The Renovite deal on terms that could not be determined shows that the longtime CEO is not deterred by concerns that he is overspending on technology.

From rehearsal to delivery

JPMorgan conducted trials with Renovite as a vendor last fall, but was so impressed with the startup’s products — particularly a cloud-based switch that routes payments to multiple vendors — that it decided to acquire the company outright, Mike said Blandina, the Bank’s Global Head of Payment Technology.

The plug-and-play nature of the Switch platform allows JPMorgan to add new payment options in a fraction of the time it used to take because far less coding is required, he said in an interview.

“Our customers attach great importance to selection; they want to offer their customers many different payment methods, be it Visa, MasterCard, but also buy it now, pay later, etc.,” said Max Neukirchen, Global Head of Payments & Commerce for the company’s solutions.

“The ability to enable these very country-specific payment methods also helps us with our geographic expansion as we don’t have to spend a lot of time building local payment methods,” he added.

While JPMorgan is often content to partner with fintechs and take relatively small stakes in them, the bank felt Renovite’s product was too important not to own, Neukirchen said.

The bank was also looking for the company’s 125 or so engineers, based in India and the UK, to help JPMorgan with its product roadmap, he added.