JP Morgan flexes fintech muscles with early pay

Legacy banks are starting to look more like fintechs every day but none more than JPMorgan Chase. Perhaps it has something to do with CEO Jamie Morgan’s obsession with the banking industry's smaller and nimbler competitors.

Chase has unveiled an early direct deposit feature for its Secure Banking customers, placing it in the same camp as famous fintech platforms Chime, Square's Cash App, and Current, to name a few. 

Starting this month, Chase will speed up eligible direct deposit payments for Secure Banking customers by up to two days, depending on when an employer sends the funds via ACH. According to the announcement, most direct deposits will qualify across payroll, tax refunds, government benefits, and pensions. 

Early pay is designed to help consumers who live paycheck to paycheck cover their bills. It basically translates to getting paid on a Wednesday instead of on a Friday for Chase users. Chase’s Secure Banking product is designed for households whose annual income falls at or below the $55,000 threshold. Most of its 1.4 million customers receive direct deposits on the platform and will now have access to their funds sooner.

Chase said the new feature is in response to customer demand. Ryan MacDonald, Chase’s head of growth financial products, stated:

“Secure Banking customers have told us that early access was one of the most appealing benefits we could offer. At a time when budgets are stretched thin by competing priorities, this is a compelling option to give households more control over how they manage their financial lives.”

Chase may be giving customers what they think they want, but it is not doing them any favours. Instead of perpetuating a cycle and enabling consumers who are waiting anxiously for their next payday, the bank could build a tool to help its financially strained customers break the cycle, not just appear to do so by getting access to funds a few days sooner. 

Meanwhile, chances are Chase is also growing weary of losing customers to the likes of Chime. Early direct deposit is a staple among many leading fintechs, whose share of the banking pie has been getting bigger. For its part, Chime offers its users, many of whom are in the low to middle-income bracket:

• SpotMe, a feature in which Chime will ‘spot’ its users by up to $200 on debit card transactions and cash withdrawals without overdraft fees,

• No monthly fees or account minimums (Chase’s Secure Banking product charges a $4.95 monthly fee),

• A secured credit card.

The proof is in the pudding. Chime reportedly boasts 12 million customers as of 2021, up 50 per cent from 8 million in 2020. Chime is not alone, with money apps such as Current (3 million+), Mark Cuban-backed Dave (12 million), Acorns (4.6 million), and SoFi (3.8 million) also posting impressive user numbers.

In his latest shareholder letter, JP Morgan boss Dimon highlighted the heightened competition that banks face, mentioning the word “fintech” 10 times in his takeaways. And as much as he is not a fan of bitcoin, Chase was an early-mover (among its peers) in the blockchain space, with JPM Coin and Dimon even making an appearance in a bank lounge in the metaverse.

JPMorgan may continue to ride the fintech innovation coattails, but it will always be a bank at the end of the day. Meanwhile, Chase has something that Chime wants—a publicly traded stock.

Chime’s IPO plans were seemingly scuttled, at least for now, after investors fled fintech stocks like the plague in 2022. It could simply be a matter of the grass always being greener. Or, perhaps in a bid to make all sides happy, some bank/fintech pairings could be on the horizon. If that's the case, banks might want to act fast before fintechs grow any larger.