Banking giant J.P Morgan Chase is taking another step into tapping fintech startups not just for investment, but for growing its business more directly. The company has officially closed its acquisition of WePay, the payments startup that powers payments for crowdfunding platforms like GoFundMe and competes with the likes of Stripe to provide payments infrastructure to any business that makes transactions online.
Sources close to the company have confirmed the price of the deal to us: just over $300 million, and up to $400 million including retention bonuses and earn-outs subject to hitting certain targets in coming quarters. (The terms of the deal were not disclosed when the Chase first announced it was acquiring WePay; it was reported to be higher than $220 million, WePay’s last funding post-money valuation.) WePay had raised $75 million since being founded in 2008 with investors including Y Combinator, August Capital, Max Levchin and many others.
The deal caps off a long negotiation process for the two companies: Chase first approached WePay to acquire it exactly one year ago. Now, there are three plans for WePay and Chase going forward.
The first is business as usual at WePay, which will continue to be run by co-founder Bill Clerico. The company already works with crowdfunding sites like GoFundMe, but also a number of others that have built SaaS elements into their business models and use WePay to collect payments for services rendered in the cloud. These include FreshBooks, Meetup (itself recently acquired by WeWork, so watch this space), Constant Contact and Freshbooks.
The second will be to leverage Chase’s existing customer base of 4 million small and medium businesses. The idea will be not only to provide payments services to these businesses where they are needed, but also a wider suite of business services beyond payments that already integrate with WePay, so that business customers can link up their banking accounts to these and use them more efficiently. This will solve a major issue around settlements for these businesses, Clerico told me in an interview.
“Most of the time with merchant providers, it’s between two business days to a week to get the money into your account,” he said. End-of-day and other “real time” settlement services that do exist tend to come at a premium. Square, for example, offers a faster option, but it’s priced at one percent of the total deposit amount, which really can add up if you’re an SMB. “We think with some of these capabilities we can rapidly increase settlement times for our customers,” Clerico added.
The third will be to use the WePay office as a beachhead of sorts to build out JP Morgan Chase’s interface with Silicon Valley to tap into more innovation from the startup world to augment the company’s legacy banking business.
To date, there has been something of a disconnect between legacy banking services and newer tech from startups, and Chase is no exception, with surprisingly few acquisitions to date from the fintech world. Perhaps the most notable prior to WePay was earlier this year, when Chase acquired the technology of MCX. MCX had started as a partner of Chase’s and then pivoted to focusing only on banking deals of this kind after it shelved plans to develop an ApplePay competitor called CurrentC.
“Part of thesis is to help Chase have a presence in Silicon Valley and be a top tech employer in the region,” Clerico said. WePay plans to double its employees to 400 in the next 18 months, which could mean further acquisitions to come.
While Chase has not been an active acquirer up to now, it has been an active investor — for example, it has backed the likes of LevelUp, Bill.com and an incubator focused on fintech. Its portfolio could be a useful place to look if one is trying to guess what other kinds of startups Chase might be interested to pick up next.
“There is a lot of consolidation happening overall,” Clerico hinted.
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