JPMorgan Tips Hand on Payments Hopes Despite Bailing on WorldpayBy and
Lender considered making bid before $9.9 billion Vantiv offer
Bank to look for other ways ‘to tackle that market’: analyst
JPMorgan Chase & Co. signaled its aspirations in the payments-processing industry with its willingness to consider a bid for Worldpay Group Plc, the London-based company being acquired by Vantiv Inc. for $9.9 billion.
JPMorgan’s merchant-acquiring unit, which handles card transactions for businesses, has vaulted to the world’s biggest by volume, fueled by the growth of e-commerce. The lender, which had considered making a bid for Worldpay, walked away Wednesday after Vantiv’s offer became public.
“I don’t think JPMorgan is going to stop here, they’re going to find different ways to tackle that market,” said Moshe Katri, an analyst at Wedbush Securities Inc. “The fact that they went after Worldpay is another indicator that they are going after the national merchants business. That would have been a direct threat for people like First Data and Vantiv.”
Payments offers high-octane growth for a company that already has leading shares in mature markets from deposits to institutional trading. JPMorgan has been systematically tackling the business, from issuing new cards like its Sapphire Reserve to signing deals with Wal-Mart Stores Inc. to snapping up a rival’s technology to beef up its mobile wallet. JPMorgan’s merchant-services business, once a joint venture with First Data Corp., has gone from $366 billion to about $1 trillion in annual purchase volume since splitting with its former partner a decade ago.
Trish Wexler, a spokeswoman for New York-based JPMorgan, declined to comment on the firm’s strategy.
The bank has expanded its relationship with Wal-Mart, with the two companies announcing in September that transactions made with JPMorgan’s Visa-branded credit- and debit-cards would be processed on ChaseNet, its proprietary payments network. ChaseNet was developed as a way to win more business with merchants by reducing the cost of accepting electronic payments.
In March, JPMorgan agreed to acquire Merchant Customer Exchange LLC’s payment technology to help its mobile and digital wallet application, called Chase Pay, better compete with Apple Inc. and Google parent Alphabet Inc. Gordon Smith, chief executive officer of the bank’s consumer-banking division, said last month that the MCX deal was “something we’d like to do more of, to look for technologies that we can acquire that will facilitate and accelerate our growth.”
JPMorgan’s merchant-acquiring business, Chase Paymentech, began as a payments processor for mail-order catalog companies, which gave it the ability to handle internet transactions when that market exploded in the 1990s, according to Wayne Johnson, an analyst at Raymond James Financial Inc. The company’s capacity to increase share among large e-commerce retailers catapulted it to the world’s largest merchant acquirer by purchase volume, according to the Nilson Report, an industry publication.
“It’s a competitive world, and the best way for everyone to fight is to be serving faster-growing distribution channels like e-commerce,” Johnson said. “That’s exactly what Vantiv is doing and clearly what Chase is looking at.”