JP Morgan bucks fintech acquisition trend with Renovite deal

by James · September 12, 2022

JP Morgan Renovite — Credit: viewimage /Shutterstock JP Morgan has unveiled plans to buy fintech startup Renovite

JP Morgan has bucked the trend of declining fintech acquisitions by buying startup Renovite. The deal comes as the investment bank fights back against the $12 billion it plans to spend on technology in the next year.

JP Morgan hopes Renovite can enable it to roll out new offers to sellers, CNBC reported. Acquirers are the middlemen that enable merchants to connect with payment processing providers and other financial services firms.

As an added bonus, JP Morgan’s acquisition of Renovite would enable it to fight back against growing competition from rivals such as Stripe and Jack Dorsey’s Block.

Smaller fintech companies like them have shot through the stratosphere in recent years, thanks to hordes of customers migrating to online shopping platforms and expecting more offerings from traditional retailers.

The same factors are behind the skyrocketing growth of buy-now-pay-later startups such as Klarna and other embedded finance companies.

However, the fintech sector has been hit by a series of setbacks recently, including declining market capitalizations, falling investments and even company closures.

At the same time, the value of fintech acquisitions has fallen in recent years. New data from research and analysis firm GlobalData reveals that the value of completed fintech acquisitions peaked in 2017. Over 256 deals worth $301.8 billion were completed in the industry that year.

These numbers have declined since then. While there were 631 acquisitions completed in 2021 across the fintech industry, they were only worth $89.6 billion in total. As of September 12, 363 acquisitions worth in excess of $72 billion have been completed in 2022.

JP Morgan acquires Renovite in its latest deal

It is against this background that JP Morgan has now decided to buy Renovite. The payment giant has been on an acquisition spree lately.

It agreed to buy Irish share compensation company Global Shares in March this year. In January, JP Morgan said it would buy a 49% stake in Greece-headquartered cloud payments platform Viva Payments. Last year it snapped up UK-based digital asset manager Nutmeg in a £700m deal.

So why did JP Morgan decide to buy Renovite? Part of the reason is that while it believed the behemoth processes more than $9 billion across its various businesses on a daily basis, revenue from the retailer fell last year.

CNCB suggested that this is partly because it has fallen behind other e-commerce providers. The Renovite deal could enable it to catch up with its rivals.

This makes more sense, considering that JP Morgan CEO and occasional bitcoin basher Jamie Dimon has singled out fintech startups as “enormous competitive threats” to incumbent banks.

It is also against this background that JP Morgan announced that they would spend 12 billion dollars on technology this year. A significant portion of the money will go to just keeping the current digital infrastructure running.

JP Morgan has not been immune to the market downturn: the stock has fallen about 25% this year. Some critics have argued that the bank should wait to invest in new technology.

Dimon has defended the spending, and given the Renovite deal, it appears JP Morgan is committed to continuing to pay in order to gain additional benefits.