JPMorgan's Fintech Deal Shows Asia Cash Services Ambitions

(Bloomberg) -- JPMorgan Chase & Co.’s first investment in an Asian financial technology firm is a key plank in the U.S. bank’s strategy to boost its cash management services in fast-growing regional markets such as India and China, according to a senior regional executive.

Last month, JPMorgan announced it was taking a stake in Global PayEx, a Mumbai-based fintech firm which helps companies manage their invoicing and payments. The purchase reflects the importance of technology investment in achieving the bank’s ambitions in transaction banking, said Kalpana Morparia, JPMorgan’s chairman for South and Southeast Asia.

“Transaction banking is a key focus for JPMorgan as a whole, and technology is the key differentiator there,” Morparia said in a recent interview. The U.S. lender may use Global PayEx’s electronic invoicing in other emerging markets, and is open to the idea of further fintech investments to bolster its cash management services for corporate clients, Morparia added.

JPMorgan earmarked $11.5 billion for technology investments in 2019 with machine learning, artificial intelligence and blockchain identified as priorities, according to its annual report. Its return on equity from cash management -- the business of helping multinational companies manage their liquidity and a key component of transaction banking -- was 20% last year, exceeding the 15% return from the corporate and investment bank.

“The biggest play in Asia is really China, followed by India, in terms of the size of the economy and the number of clients that we wish to serve there,” Morparia said. “So we are constantly looking for anything that we can do for them to make it far easier for them to operate.”

The Global PayEx service is especially attractive in a market like India, where corporate clients often struggle with “much documentation, heavy invoicing and then the associated problems with any reconciliation,” she said. “This can be used in any other market with the same problems.”

The U.S. lender falls outside Greenwich's top 10 in cash management in Asia. Still, it has ``really strong momentum'' to catch up quickly, thanks to high client perceptions of its products, people and capabilities, said Gaurav Arora, regional head of corporates & institutional banking for Asia Pacific & Middle East at Greenwich Associates.

JPMorgan is also eyeing India’s growing loan securitization market, which has picked up strongly as a number of banks and shadow lenders have sought to offload their loan portfolios during a squeeze in the money markets.

“I think the securitization market will grow well in India,” Morparia said. “The regulatory system is fairly good and is in place. Now you will start seeing volumes. We want to move in there.”

To contact the reporters on this story: Suvashree Ghosh in Mumbai at sghosh186@bloomberg.net;Anto Antony in Mumbai at aantony1@bloomberg.net

To contact the editors responsible for this story: Marcus Wright at mwright115@bloomberg.net, Russell Ward

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