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‘Internal war’ in JP Morgan before the possibility of ending credit cards forever

As with any risky move, the latest plan devised by major US investment bank JP Morgan Chase has some internal divisions at stake. A unit of the entity works i a system that makes credit cards expendableeither. They do so under the direct orders of the CEO of the largest bank in the US, the famous Jamie Dimon. However, other units within the firm do not see it so clearly and are expressing it.

According to the Financial Times, the order came from Dimon during a closed door meeting at JP Morgan headquarters in November. Facing growing pressure from the successful fintechmore agile in terms of payment systems, the CEO pressured the heads of its two largest divisions to put aside any differences and collaborate on a new payment processing system.

“If I find out that none of you are sharing information with others, or that you are withholding information, you are firedDimon told the roughly 15 executives gathered for the meeting in New York, according to two people with knowledge of the remarks.

Dimon’s statement, sources the FTdelivered in his usual teasing style, but highlighted the challenges big banks face as they try to modernize their technology.

The new system being developed by corporate and investment bank JP Morgan – a unit known by the acronym CIB – which would allow merchants to receive payments directly from consumerseliminate the need for debit or credit cards and threaten the lucrative fees earned by banks and the dominant Visa and Mastercard card companies.

The belief that this system had the ability to replace plastic was created inevitable tension with the consumer and community banking division of JP Morgan -CCB-, which registered more than 5,000 million dollars in income from cards in 2021.

However, Dimon felt it was better current income risk to allow non-bank competitors to get ahead of JP Morgan. It’s happened before: Dimon has said that JP Morgan should have built its own mobile payments platform for merchants before Square, the fintech co-founded by Jack Dorsey and now renamed Block.

The debate last November lasted until six hours and focused on how JP Morgan’s many powerful internal stakeholders would operate the project. Among the executives present were Daniel Pinto, the bank’s president and head of the BFS unit, as well as Marianne Lake and Jennifer Piepszak, who was recently promoted to co-head of the CCB unit.

The initial plan was for the BFS unit to deal with technology and work with merchants, while the CCB unit worked to clarify safeguards for customers in the event of abuse or fraud.

Trader demand

JP Morgan’s entry into the bank payment system corresponds to the demand from merchants such as Amazon and Walmart, who complain that banks and card companies have pig interchange fees, which in the United States are 1.8% per transaction, according to the CMSPI payments consultancy. In the EU, interchange fees are capped at 0.3% on credit card payments and 0.2% on debit cards.

It is a fact that every time a card is swiped, the seller takes a little money. In 2020, US merchants paid approximately $110 billion in fees processing costs for $7.6 trillion in card transactions, according to the Nilson Report.

The new system, which would allow merchants to receive payment directly from the customer’s bank account, is part of the growing move towards “open banking,” which allows consumers to give financial providers the ability to access their financial information.

Payments by bank transfer have been submitted fashionable in countries like the Netherlands and Indiabut American consumers have been slower to adopt.

This is due in part, in part, to the clumsiness of the country’s automated bank-to-bank clearinghouse, a network that settles payments in days rather than seconds and whose roots date back to the 1970s. Next year, as planned by the Federal Reserve of the United States. send FedNowa new fast payment service for big banks, and it is another reason why JP Morgan is betting on bank payment.

In the short term, JP Morgan believes banks have a payoff another option for rent and bill paymentsas well as for cash, premium debit and checks, rather than credit cards, according to those involved in the project.

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