PC: CNBC

In order to counter threats from fintech companies like Stripe and Block, JPMorgan Chase has agreed to buy a payments startup called Renovite, according to information obtained by CNBC.

The bank, a significant player in the worldwide payments industry, claimed that Renovite, based in Fremont, California, will help it roll out new services to merchants more quickly.

JP Morgan leads the industry in terms of transaction volume, but fast-rising upstarts like Stripe and Block have moved up the rankings in recent years as a result of surging e-commerce sales and the spread of new payment options. Sellers can accept payments both offline and online thanks to merchant acquirers, who work in the background and take a small cut of each sale.

JPMorgan’s merchant acquiring revenue stagnated last year despite operating a payments behemoth that processes more than $9 trillion per day across several businesses, in part because it lagged behind in some e-commerce segments and provided fewer services than some fintech competitors, Takis Georgakopoulos, the global payments chief, said in a May conference to investors.

Georgakopoulos swore, “Changing that picture is a big story behind our investments.

Shopping marathon

The acquisition of Renovite, which was first reported by CNBC, is the most recent in a line of fintech transactions undertaken under CEO Jamie Dimon. In addition to a number of smaller fintech investments, JPMorgan has purchased at least five businesses since late 2020, ranging from an ESG investing platform to a UK-based roboadvisor.

Dimon has often warned about the danger that fintech companies represent to established banks, particularly in the fiercely competitive payments market.

Fintech businesses have utilised merchant payments processing as a wedge to aid in the development of ecosystems that have attracted eye-popping valuations. Additionally, they have often been quicker to enable new payment options like those provided by Klarna and Affirm.

Dimon has been compelled to explain his bank’s increasing costs as it invests billions in technology amid a 25% stock decline brought on by recession worries this year.

The Renovite deal, at terms that were not disclosed, demonstrates that the longtime CEO is unfazed by criticisms that he is overspending on technology.

Trials through takeover

JP Morgan ran trials with Renovite as a vendor last fall, but was impressed enough with the startup’s products — especially a cloud-based switch that routes payments to various providers — that it decided to acquire the company outright, according to Mike Blandina, the bank’s global head of payments technology.

The plug-and-play simplicity of the switch platform allows JPMorgan to introduce new payments choices in a fraction of the time it used to take since it involves significantly less code, he said in an interview.

Max Neukirchen, the company’s worldwide head of payments & commerce solutions, stated that “our clients really value choice; they want to offer a wide variety of payment ways to their clients, whether it be Visa, MasterCard, but also Buy-now, pay-later, etc.”

“The ability to turn on these very country-specific payments methods also helps us in our geographic expansion, because we don’t need to spend a lot of time building out local payment methods,” he added.

Although JPMorgan is frequently happy to collaborate with fintechs and invest modest amounts in them, the bank believed Renovite’s product was too crucial to not own, according to Neukirchen.

According to him, the company’s roughly 125 engineers in the U.K. and India were also sought after by the bank to assist it with its product roadmap.