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JPMorgan Chase eyes expansion to Continental Europe and Brazil

JPMorgan Chase eyes expansion to Continental Europe and Brazil, Stripe enters the credit card market, and an FIS survey finds that U.S. financial firms plan to invest heavily in embedded finance

June 05, 2023

Hi!

Hope you had a fantastic weekend! Amsterdam will host the “Money 20/20 Europe” conference this week, so we should expect many exciting announcements! In the meantime, let’s look at a few stories from the previous week:

  • JPMorgan Chase eyes expansion to Continental Europe and Brazil

  • Stripe enters the credit card market with a charge card issuing program, and

  • FIS survey finds that U.S. financial firms will invest heavily in embedded finance

Thank you for reading and see you tomorrow!

Jevgenijs

JPMorgan Chase Eyes Expansion to Continental Europe and Brazil

Speaking at Bernstein’s Annual Strategic Decisions Conference, Daniel Pinto, the Chief Operating Officer at JPMorgan Chase, floated the idea of the company expanding its retail operations beyond the United States and the United Kingdom. Thus, in 2021 the company decided to expand to the United Kingdom with the launch of Chase UK, as well as acquired a 40% equity stake in a full-service digital bank, C6, to explore opportunities in the third biggest retail market, Brazil.

In just twenty months since its launch in September 2021, Chase UK has acquired over 1.6 million customers and $20 billion in deposits. The company’s mobile app has a rating of 4.8 in Google Play store, and a rating of 4.9 in Apple App Store, as well as won the Best British Bank honor at the 2023 British Bank Awards ceremony. The company expects to break even in the United Kingdom in 2027, and will expand to other European countries after that, commented Daniel Pinto.

Image source: Chase UK on App Store

JPMorgan had limited brand recognition in the UK, yet managed to successfully compete with the local digital banks such as Monzo, Revolut and Starling. Interestingly, the company’s investee in Brazil, C6 bank, is opening physical branches to complement its digital offering and compete with the likes of Nubank and Inter. Should we expect to see Chase branches in the UK?

Stripe Enters Credit Card Market with Charge Card Issuing

Payments giant Stripe announced the launch of a commercial charge card program through its Stripe Issuing product. Previously, Stripe-issued cards could only be used to spend funds from a prefunded account, but the new charge cards will allow companies to create and distribute virtual or physical cards that enable their business customers to spend on credit. The company issued over 100 million cards in the US, UK, and EU since launching Stripe Issuing service in 2018, and boasts Shopify and Klarna amongst its clients.

Stripe's charge card program requires companies to establish their own underwriting policies, but Stripe aims to assists its clients in establishing risk controls and ensuring compliance. In the United States, Stripe collaborates with sponsoring banks to issue cards and aims to generate revenue through interchange fees and compliance fees. Corporate spend management startup Ramp, is among the first users of the new issuing program. The charge card program is currently in beta in the U.S. and will later expand to the EU and the U.K.

Image source: Stripe

On the issuing side, Stripe competes with such Fintech companies as Adyen, Marqeta (NASDAQ: MQ) and SoFi’s Galileo (NASDAQ: SOFI). Earlier in the year, Marqeta acquired Power Finance, a company offering a cloud-native platform for credit card program management, for $223 million in cash. Marqeta has its own credit card processing capabilities, and acquired Power Finance for its embedded finance capabilities that allow integrating credit card offering directly into clients’ applications.

U.S. Financial Firms to Invest Heavily in Embedded Finance, FIS Survey Suggests

Speaking of embedded finance…FIS (NYSE: FIS) surveyed 2,000 senior executives for its “Global Innovation Report 2023” to find out which innovations are affecting their businesses and how they plan to respond. Not surprisingly, the survey confirmed that embedded finance is a hot topic, with 83% of executives expecting embedded finance to impact their organization over the coming years and “more than a third of U.S. financial firms to invest heavily in embedded finance over the coming months.” Other trends mentioned in the report were cryptocurrencies, decentralized finance and metaverse (for real?!).

Last week, Jason Mikula of , reported that FIS is acquiring a Banking-as-a-Service platform Bond. Bond, in partnership with its banking partners, Evolve Bank & Trust, CBW Bank, and UMB, provides deposit accounts, consumer and commercial debit, credit and charge card issuing, as well as payments. Earlier this year, Fifth Third Bank acquired a BaaS platform Rize. M&A activity is intensifying, and BaaS providers seem to the be the first acquisition targets for established players.

Since early 2022, PayPal (NASDAQ: PYPL) and Block (NYSE: SQ), are trading at lower EV/NTM Sales multiples than their more established counterparts, Fiserv (NASDAQ: FISV), Global Payments (NYSE: GPN), and FIS (NYSE: FIS). I guess, there is no better way to illustrate that cash is valued higher than growth at the moment 🤷🏻‍♂️

Cover image: JPMorgan

Disclaimer: Information contained in this newsletter is intended for educational and informational purposes only and should not be considered financial advice. You should do your own research or seek professional advice before making any investment decisions.