JP Morgan flexes fintech muscles with early payments

JP Morgan has seen the light and has added an early direct deposit feature for some clients.

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Legacy banks are becoming more like fintech every day, but none more so than JPMorgan Chase. Perhaps it has something to do with CEO Jamie Morgan’s obsession with the banking industry’s smaller, nimbler competitors.

Chase has unveiled an early direct deposit feature for its Secure Banking customers, placing it in the same camp as well-known fintech platforms Chime, Square’s Cash App and Current, to name a few.

Starting this month, Chase will expedite eligible direct deposit payments for Secure Banking customers by up to two days, depending on when an employer sends the funds via ACH. According to the announcement, most direct deposits will qualify across wages, tax refunds, government benefits and pensions.

Early Pay is designed to help consumers who are living paycheck to paycheck to cover their bills. That basically means getting paid on a Wednesday instead of a Friday for Chase users. Chase’s Secure Banking product is designed for households whose annual income falls at or below the $55,000 threshold. Most of their 1.4 million customers receive direct deposits on the platform and will now access their funds earlier.

Chase said the new feature is in response to customer demand. Ryan MacDonald, Chase’s Head of Financial Growth Products, stated:

“Secure Banking customers have told us that early access was one of the most appealing benefits we could offer. At a time when budgets are stretched thin by competing priorities, this is a compelling option to give households more control over how they manage their economic life.”

Chase can give customers what they think they want, but that doesn’t do them any favors. Instead of perpetuating a cycle and enabling consumers anxiously waiting for their next paycheck, the bank can build a tool to help its financially strained customers break the cycle, not just appear to do so by accessing to funds a few days earlier.

Meanwhile, there’s a good chance that Chase is also getting tired of losing customers to the likes of Chime. Early direct deposit is a staple among many leading fintechs, whose share of the banking pie has grown. For its part, Chime offers its users, many of whom are in the low- to middle-income bracket:

• SpotMe, a feature where Chime will “spot” its users with up to $200 in debit card transactions and cash withdrawals without overdraft fees,
• No monthly fees or account minimums (Chase’s Secure Banking product requires a monthly fee of $4.95),
• A secured credit card.

The proof is in the pudding. Chime reportedly has 12 million customers as of 2021, up 50 percent from 8 million in 2020. Chime isn’t alone, with money apps like Current (3 million+), Mark Cuban-backed Dave (12 million), Acorns (4.6 million) , and SoFi (3.8 million) also post impressive user figures.

In his latest shareholder letter, JP Morgan CEO Dimon highlighted the increased competition facing banks, mentioning the word “fintech” 10 times in his takeaways. And as much as he’s not a fan of bitcoin, Chase was an early mover (among his peers) in the blockchain space, with JPM Coin and Dimon even appearing in a banking lounge in the metaverse.

JPMorgan may continue to ride the fintech innovation jackets, but it will always be a bank at the end of the day. Meanwhile, Chase has something that Chime wants – a publicly traded stock.

Chime’s IPO plans were apparently shelved, at least for now, after investors fled fintech stocks like the plague in 2022. It could simply be that the grass is always greener. Or, perhaps in an effort to make all sides happy, some bank/fintech tie-ups could be on the horizon. If that’s the case, banks may want to act quickly before fintech grows any bigger.