JPMorgan Chase Shuts Down Fintech Site, Founder Lied Says About Size of Customer Base
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It looks like Jamie Dimon’s famous fear of fintech has gotten the best of him.
On Thursday, JPMorgan Chase shut down Frank, a student financial aid planning platform, and sued the company’s founder for grossly misrepresenting its customer base by loading it with millions of fake accounts. You might ask why anyone would have the audacity to defraud the largest bank in America, but the real question may be how did JPMorgan CEO Dimon, aka “America’s Banker,” and his team let themselves go down in flames?
Broken and broken
JPMorgan acquired Frank and its creator Charlie Javice for $175 million in 2021. Javice boasted that her site was the “fastest growing college planning platform” used by more than five million students at 6,000 schools. It provided a tantalizing line into a vein — that is, potential customers for the megabank, if any of them had actually been Frank users.
After sending out marketing emails to 400,000 Frank customers, 70% returned, which is a pretty low hit rate (and we say this as a newsletter). Now JPMorgan claims that Javice and another executive Olver Amar created nearly 4 million fake accounts. While one has to tip one’s hat to Javice’s “entrepreneurialism,” they might also want to ask if JPMorgan could use some help with due diligence: :
- Fintech has more scattered regulations than traditional banks, and due to new advances in technology, companies also have great growth potential. In contrast, the banks have limited market distribution, which Dimon has publicly admitted that he finds existentially terrifying. That fintech paranoia may have played a role in the bank’s decision to buy Frank.
- In recent years, JPMorgan has acquired companies such as OpenInvest and Global Shares and invested millions in data groups Kraft Analytics and MioTech to fend off fintech competition. Dimon has also plowed money into proprietary technology development for a decade. Last December, the bank paid $800 million to buy a 48.5% stake in Athens-based payments platform Viva Wallet.
“Banks face extensive competition from Silicon Valley, both in the form of fintechs and Big Tech companies,” Dimon told shareholders in 2021.
I tell: In other JPMorgan legal news, the bank is asking the courts to stop a former employee from poaching its clients. A complaint alleges that Joseph Michael, who worked for JPMorgan for more than 18 years, breached a contract after he left the company in December and had 32 former clients with assets totaling $28 million transfer their accounts to his new workplace. Just because Jaime is paranoid doesn’t mean no one is raiding his staff.
