JPMorgan ( JPM ) fintech deal to buy Renovite to fight Stripe and Block

JPMorgan Chase has agreed to buy a payments startup called Renovite to fend off threats from fintech firms including Stripe and Block, CNBC has learned.

The bank, a major player in the global payments arena, said the acquisition of Fremont, Calif.-based Renovite will speed up its ability to roll out new offerings to merchants.

While JPMorgan is the world’s largest provider of merchant services by transaction volume, fast-growing upstarts including Stripe and Block have climbed the ranks in recent years, thanks to booming e-commerce sales and the proliferation of new payment methods. Merchant acquirers are important behind-the-scenes providers that enable merchants to accept payments in person and online, with a small portion of each transaction.

Despite operating a payments system that processes more than $9 trillion daily across multiple businesses, JPMorgan’s merchant revenue stalled last year in part because it lagged in some e-commerce segments and offered fewer services than some fintech rivals, its global payments chief said Takis Georgakopoulos investors at a May conference.

“Changing that image is a big story behind our investments,” Georgakopoulos promised.

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

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

Fintech players have used merchant payment processing as a wedge to help them build ecosystems that have garnered eye-popping valuations. They have also generally been better at activating new payment methods such as offers from Klarna and Affirm.

Dimon has been forced to defend the bank’s rising spending this year as it plows billions of dollars into technology amid a 25% stock decline fueled by recession fears.

The Renovite deal, for terms that could not be determined, shows the longtime CEO is not deterred by concerns that he is spending too much on technology.

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

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

“Our customers really value choice; they want to offer many different payment methods to their customers, whether it’s Visa, MasterCard, but also Buy Now, Pay Later, etc.,” said Max Neukirchen, the firm’s global head of payments and commerce . solutions.

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

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

The bank also coveted the firm’s 125 or so engineers, located in India and the UK, to help JPMorgan with its product roadmap, he added.