JPM Payments, Renovite Deal challenges PayPal

Maybe not Stripe and maybe not Block – not specifically anyway.

Instead, JP Morgan’s latest acquisition looks like a shot across PayPal’s bow.

It’s no secret that banks want—and need—to expand their payment capabilities, serving a variety of new use cases that serve consumers and enterprise customers alike.

To this end, JP Morgan said on Monday (Sept. 12) that it will buy Renovite Technologies, a cloud-based payments technology company.

Treasury services and beyond

In terms of mechanics, the financial services giant is folding Renovite into its JP Morgan Payments operations, which in turn are geared towards corporate treasury services, trade finance, card and merchant services.

Seven-year-old Renovite has developed six proprietary, cloud- and payment-token-agnostic payment products to help its customers “optimize infrastructure, including switch, reconciliation, security, issuance, ATMs and testing,” according to Monday’s press release. Renovite also has a presence in India and the UK and has been providing services to JP Morgan since 2021.”

The focus here, of course, would be most immediately on trading services, on a large and global stage. And while the media seems to be focused (at least for now) on the challenge that the bank’s actions would pose for Stripe and Block, we contend that the tournaments are instead targeting PayPal more directly.

PayPal naturally operates as a two-way network, merging customers and payment processing and a wide range of next-generation connected economy use cases.

(We’re seeing more evidence of this cross-pollination from other big names in financial services. American Express, for example, launched a buy-now-pay-later (BNPL) option with Delta.)

To the JP Morgan Payments/Renovite, by connecting consumers and merchants with the flexibility afforded by tokenization, can enable JP Morgan to move back to connected cars and other environments where commerce is deeply embedded in the mix. And these use cases can be optimized with a range of payment methods.

The aforementioned functionality to optimize infrastructure and card capabilities suggests that the ultimate challenge for JP Morgan (and hence its payments operations) is not only to bring JP Morgan directly into competition with the PayPals of the world, but also could lie in the card networks themselves.

JP Morgan is the largest bank in the US and one of the largest banks in the world and has the scale to connect customers to merchant bank accounts – directly and in real time. Among other things, JP Morgan also has the ability to be ever more creative with offers and rewards for customers (individual consumers and companies) backed by its huge deposit base. In this case, the company could, for example, switch more to BNPL/installment loans, which could help to strengthen customer loyalty.

Cross-channel, of course. As Karen Webster of PYMNTS wrote earlier this year, “Digital transformation… should never mean purely digital. It was always about the reality that almost every interaction between the physical world and the physical world will have some kind of digital connection. The tremendous opportunity innovators have to create these new experiences for consumers and businesses, and to leverage and monetize these interactions, will drive the digital transformation of the global economy.”

As Julie Lubell, Global Head of Trends and Intelligence Advisory at JP Morgan, told Webster at the start of 2022, Five trends the firm is currently monitoring to move treasury management professionals and client firms more fully into the digital age are : digital as a culture; all as a service; Payments as a revenue driver; reconciliation of working capital and liquidity; and engage with environmental, social and governance (ESG) initiatives. The one theme permeating all of these trends is connectivity, we realized at the time. And the Renovite deal is just another building block being put in place to help make connectivity a reality.

Also read: JPMorgan Sees 2022 as the Year of Connectivity, Predicting the Rise of Anything as a Service

New PYMNTS study: The Mainstreaming of Digital Banking

A PYMNTS survey of 2,124 US consumers shows that while two-thirds of consumers have used FinTechs for some aspect of banking services, only 9.3% cite them as their main bank.

We’re always looking for opportunities to partner with innovators and disruptors.

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