- JPMorgan is using acquisitions to keep up in a competitive war with fintechs.
- Global head of JPMorgan Payments Takis Georgakopolos prioritizes tech and talent in fintech deals.
- The bank is looking at non-traditional markets — like Salt Lake City or Buenos Aires — for talent.
JPMorgan Chase has been one of the most active banks on Wall Street when it comes to buying fintechs, inking at least 10 deals with startups across a range of consumer businesses since 2020.
Takis Georgakopoulos, global head of JPMorgan Payments and a member of the firm’s operating committee, said the bank’s approach to acquiring these fintechs is built on two fundamental pillars: innovative tech and skillful engineers.
“When we think about both acquisitions and partnerships, the first question that my boss will ask is not, ‘What are the revenues?’ The first question is, ‘How good is their technology? How good is their engineering talent?’ That, for us, is the cornerstone and the binding constraint in growing our business,” Georgakopoulos said at a Bank of America conference on Tuesday.
But finding fintechs that line up with those two pillars is “difficult,” Georgakopoulos added.
For one, startups aren’t cheap. Georgakopoulos is less-inclined to shell out for fintechs that have become soaringly expensive.
According to CB Insights, valuations for mid-stage fintechs in the private markets jumped 144% from the third quarter of 2020 to 2021. Early-stage valuations, meanwhile, rose 78%. The average deal size among payments fintechs, specifically, has nearly doubled over the past year, to $62 million year-to-date.
“Because of where the valuations are, we — at least in the payments space — are wary of paying very high multiples for revenues,” Georgakopoulos said.
JPMorgan recently rebranded its wholesale payments business, which is led by Georgakopoulos, to JPMorgan Payments.
Startups also play within a different regulatory sandbox relative to banks the size of JPMorgan, Georgakopoulos said. The sentiment has been echoed by CEO Jamie Dimon, who on an earnings call earlier this year called out regulations on debit cards that he said have given fintechs an “unfair” competitive advantage.
Georgakopoulos continues to see acquisition opportunities within the broader market for fintechs — but many of them might not be based in the US.
“When you start looking at other parts of the world, you find niche deals, and you’ve seen some of those from my colleagues on the Chase international side, where you get more interesting things and a great management team,” Georgakopoulos said.
Finding top tech talent in new places
When it comes to hiring highly-skilled workers and executives, JPMorgan faces the same existential questions other banks and tech giants do: “We continue to hire great talent, but we also lose great talent,” Georgakopoulos said.
Amid a hyper-competitive environment for these tech workers in certain parts of the US, Georgakopoulos recommended looking elsewhere to find new employees, like in Europe and cities ranging from Salt Lake City to Buenos Aires.
“We just need to continue hiring aggressively, but also diversify the pool of talent that we get. If the only place you get talent is Palo Alto, good luck with that,” Georgakopoulos said.
But JPMorgan has also found success hiring from some of Silicon Valley’s biggest names.
Georgakopoulos said he has “an infinite amount of trust for the talent in the big tech companies on the West Coast like Google and Apple and Facebook” who have “extremely talented engineers.” But the scale of the work done at the companies doesn’t compare to that at JPMorgan, he said, which is a draw for tech workers to the bank.
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