Through this move, JPMorgan has chosen to embrace its competitors rather than openly oppose their disruptive business model. With its strong existing network with lower customer costs, it can more effectively fight them while expanding its customer base with newer technologies.
JPMorgan Chase & Co has stated that it is set to take a stake in InvestCloud, a company which it had earlier hired. InvestCloud creates software which facilitates banking and investments related transactions for customers.
JPMorgan has however not disclosed the amount of its stake at InvestCloud.
This strategic move by Jamie Dimon, JPMorgan Chase’s CEO, is in response to threats posed by new entrants in Silicon Valley whose business models were perceived as disruptive to JPMorgan’s business. Instead of choosing to oppose them, he has tactfully joined the technological upstarts providing better customer service with lower costs.
JPMorgan is competing with other money managers and other banks in order to meet the rising expectations of its customers in an easy and secure manner which enables them to manage their affairs anywhere in the world and any time.
This investment into InvestCloud is also strategically part of Dimon’s commitment to spend $300 million, phased over 3 years, on digital improvements in asset management.
From early 2017, JPMorgan will capitalise on its investment in InvestCloud by allowing its customers to customise website dashboards and mobile apps with investments ranging from $1,000 to $1 billion plus.
The benefits of staying with InvestCloud is that rather than having costly slogs of traditional programming, the platform offers thousands of “lightweight applets” which can be configured within days rather than months.
InvestCloud began selling its products to customers since 2012. So far it has 660 institutions under its umbrella and has $1.5 trillion in assets, which are managed using its tools.
Dimon has cited InvestCloud’s “record of driving innovation for its institutional clients” as a reason for this deal.
Since December 2015, JPMorgan has struck deals with financial technology companies, including OnDeck, Virtu Financial Inc. and TrueCar Inc. While OnDeck provides systems to speed small business lending, Virtu Financial Inc handles electronic trading in U.S. Treasuries and TrueCar Inc. provides online car shopping services.
Kelli Keough, JPMorgan’s global head of digital wealth management, said in an interview that she expects to sign additional deals with financial technology companies.
“We are exploring with a range of vendors. It allows us to get to market faster and bring in innovation,” she said.