JPMorgan Chase has agreed to acquire payments company WePay, marking the firm’s first major acquisition of a fintech company, according to The Wall Street Journal.
Chase plans to leverage WePay’s technology — the fintech company provides payments-as-a-service APIs, which have been used by online marketplaces and crowdfunding websites, like GoFundMe and FreshBooks, for payment processing — to give its 4 million small business customers the ability to accept digital payments instantly and to get paid faster.
Software-enabled payments represent a major opportunity for providers.
For Chase, this is also an opportunity to push its products and services to a wider audience. In the payments space, software-enabled solutions represent a major opportunity for providers — this business is growing at four times the industry average — but integrating is no easy task, as security and regulatory requirements make for a friction-filled process.
However, WePay’s service makes it easier for players in the space, specifically independent software vendors (ISVs) and business app developers, to integrate payments into their own software with its APIs, which in turn could make Chase a more attractive option for these providers. It’s also important to note that this latest acquisition could be a shift in strategy for Chase in how it handles fintech challengers.
Wider Implications For Payments Market
The payments industry is inundated with fintech challengers, putting increased pressure on traditional financial firms to react.
- Fintechs around the globe have seen increased interest, thanks to their ability to challenge legacy players in the financial space. Global fintech funding is growing at a rapid pace — for example, this funding hit $19 billion in 2015, but by mid-August 2016, funding had already reached $15 billion. This includes major investments from Chase — the bank has invested in a number of fintechs, including , LevelUp, OnDeck Capital, and Prosper.
- However, this acquisition by Chase could point to a strategy shift for traditional financial firms. Rather than just simply working with or investing in WePay, Chase decided to acquire the payment company for an estimated price north of $200 million. This gives the bank immediate access to the payment company’s technology, consumer base, and knowledge — WePay is expected to operate as Chase’s payments innovation incubator. More firms will likely adopt this same strategy, not only to ensure their position in the market remains unthreatened by fintechs, but also to keep pace with competitors that are scaling quickly with these acquisitions.