Apple Pay Makes Chase’s Investor Day

Apple Pay is making Chase’s day — at least that’s the one of the story lines that came out of JPMC’s investor day yesterday (Feb. 24). That, and a case against the JPMC breakup (again).

First, consider the following Apple Pay stats:

Card activation is on a steady increase since October, with 1 million cards activated since Apple Pay’s launch.

69 percent of the cards registered to Apple Pay are credit cards

58 percent of the activity is concentrated in the top 5 merchants (Chase does not list the merchants).

The users, not surprisingly, are younger and more affluent- which, tracks, of course, to the profile of the iOS user more generally.

An interesting question is how these stats impact the cost to the merchant. Consumers that might otherwise pull out a debit card at Whole Foods, for instance, and who now use Apple Pay linked to a credit card are costing that merchant more. That will go down a lot easier if merchants are gaining more spend from those customers and/or getting customers that they might not have otherwise seen because they use Apple Pay and that is how consumers prefer to pay.

But that wasn’t the only story line of the investor day, of course.

“Bigger is better,” and JPMorgan Chase is better when together, says CEO Jamie Dimon.

That’s the stance Dimon took last month when the bank presented JPMorgan’s latest earnings report, and he stuck to that mantra when speaking at the company’s investor day yesterday, as he made the case as to why the banking giant is not, and should not be considered a conglomerate.

Dimon also said last month that “banks are under assault,” and this was the underlining tone reiterated during yesterday’s meeting when Dimon spoke about the strength of JPMC that stems from its global presence, size and diversification. CFO Marianne Lake backed up that claim with a few stats about the company, stating that JPMC produces $18 billion per year in synergies, according to a Seeking Alpha report, which noted that $15 billion is generated from revenues across its different units (which overall produces $3 billion in cost savings).

“In a capitalist world…you better be giving the customer more — better, faster, quicker — or you lose,” Dimon said at the event held at the bank’s NYC headquarters. “Our mix obviously works for the client. …We’re not going to follow the lemmings off the table.”

The case against the JPMC breakup remained the theme of Tuesday’s meeting as Lake said a split would add expense to the company — impacting shareholders — as JPMC would be required to duplicate divisions and thereby adding costs, CNBC reported. Lake said as it’s currently operated, the banking company is able to create $3 billion in efficiencies that would not be possible if the company was broken apart.

“These are not trivial things. ….Scale has always defined the winner in banking,” said Lake, who later told the group at investor day that “[JPMC has] been able to consistently demonstrate our ability to leverage that scale and successfully adapt. We have a unique asset, an irreplaceable asset, in the shape of our company and the mix of our businesses.”

But even in that capitalist world that Dimon referenced, JPMorgan has been quick to respond to regulatory pressures as it announced Tuesday that it would take measures to cut institutional deposits across its banks by up to $100 billion by the end of 2015 in order to meet new capital requirements that penalize banks for large, uninsured deposits that regulators consider to be unstable, according to multiple media reports about the investor day. JPMC is also aiming to lower investment bank expenses by $2.8 billion.

“We are adapting to a changing regulatory environment across our company,” a JPMorgan memo said, according to The Wall Street Journal.

JPMC Backs $3 Million Financial Innovation Challenge

Also reported during the investor day was JPMC’s announcement that it would be closing 300 retail branches over the next two years to adjust to the changing times where customers are increasingly turning toward online and mobile banking. The banking giant said that overall, these measures will help JPMorgan reduce $1.4 billion in annual expenses across its consumer and banking units.

In other JPMC-related news that came on the company’s investment day was that a JPMorgan Chase-backed non-profit group is launching a $3 million competition for startups that are building solutions to help consumers manage their finances on a tight budget, the Chicago-based Financial Solutions Lab.

The competition, which will take applications until April 7, is looking for entrepreneurs and non-profits that are developing products and services for households that don’t have enough savings to get them through between paychecks without turning to payday lenders or other expensive cash bridge products. The Financial Services Lab is a $30 million project of JPMorgan Chase and the Center for Financial Services Innovation (CFSI).

According to a 2013 CFSI report, more than 100 million Americans have trouble balancing household finances and 43 percent struggle to pay their bills. Overall, Americans annually spend about $36 billion on credit and transaction products to get from one paycheck to the next.

“We want to identify and support innovators who are working to meet consumer needs with meaningful, scalable solutions,” CFSI CEO Jennifer Tescher wrote in a prepared statement. “The Lab will help build the next generation of financial products and services to improve consumer financial health.”

The challenge will select at least eight winners to receive up to $250,000 in capital. CFSI will also provide another $1 million in professional services and non-financial support over the course of 2015 and 2016. Winners, which will be announced at CFSI’s Emerge Conference on June 11, will be selected by a panel that includes experts from JPMorgan Chase, CFSI, and strategic partners in human-centered design, behavioral economics, community outreach and for-profit entrepreneurship, the organization said.

CFSI also announced a 20-member advisory council that will give advice to the competition’s winners, including startup founders, venture capitalists and executives from Intuit, Salesforce and the Bill and Melinda Gates Foundation.

JPMorgan Chase unveiled the five-year Financial Solutions Lab project last year with $30 million of funding, $25 million of which is managed by the CFSI. That includes the money that will go to winners of the competition — which means that startups already funded by or doing business with the bank are still eligible for the competition.

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(Source: JPMorgan Chase)