An established player in Canadian corporate banking, JPMorgan Chase is looking to grow in small and medium-size enterprise (SME) banking and payments by leveraging its Canadian banking licence, international experience and technology.
It also wants to experiment with new digital payment services in Canada before launching them elsewhere.
"The Canadian payments market is an arms race, involving high-quality investments and tech talent to push products forward," said Matthew Parker-Jones, Chase's global head of pay by bank, country head of treasury services for Canada, and managing director. "Canada is a laboratory where we can try out new services that we can later offer in other markets."
For the past 20 years, Chase has offered corporate banking services in Canada including payroll, B2B payments, international payments, collections and commercial lending in the corporate and commercial banking space.
Chase is also a significant player in Canadian merchant acquiring. Globally, across all payment types, Canada is Chase's fourth-largest payments market, even though it doesn't offer retail banking services in Canada, said Parker-Jones.
Chase Merchant Services has 80,000 Canadian clients which range from coffee shops to large businesses and government departments, making it one of the top three acquirers in the nation, the bank says.
Users of Chase's card processing and acquiring services include 20,000 members of the Canadian Federation of Independent Business who collectively process over CA$14 billion in transactions through Chase. "We chose Chase as it was willing to work with us to aggregate our members' sales volumes and offer far lower rates than an individual merchant can get on their own," said Dan Kelly, CFIB's president.
In addition to small-business acquiring, Chase processes a large amount of Canada's e-commerce transactions, according to Kelly. Canadian e-commerce purchases totaled 500 million transactions worth CA$63 billion in 2021, according to payments infrastructure operator Payments Canada's
Now Chase is expanding from acquiring into full banking services in the Canadian SME market.
"We're looking at how we can provide merchant lending at scale, down to the SME level, as some of our merchants are requesting lending solutions," said Parker-Jones. "Canadian merchants typically use a third-party acquirer and another company for their bank accounts and payments. By being an acquirer and a commercial bank, we can bundle all this together in a single relationship to better serve SMEs."
This will bring Chase into direct competition with Royal Bank of Canada and BMO Financial Group which offer business banking as well as acquiring services via their Moneris joint venture, Canada's largest acquirer. Chase will also compete with TD Bank Group, which offers both business banking and merchant accounts through TD Merchant Services.
These incumbent banks offer rapid settlement of transfers between business and merchant accounts for their customers, plus online reporting and additional banking services such as financing, cash management, U.S. banking and wealth management advice.
Chase is looking to its payment capabilities to give it a competitive edge in expanding in Canadian SME banking and services. Its goal is to offer "anyhow, anywhere, and any time" payments for Canadian clients, Parker-Jones said.
"This means enabling merchants to receive payments in any way their customers want, whether from PayPal or some other method," he said. "Similarly, we want to offer merchants the ability to make payouts in any way their suppliers or customers choose. This means being payments-agnostic, so our clients don't need to go to other providers to use specific payment methods."
Chase is focusing on technology to support
"We're committed to real-time payments in Canada and are involved in discussions about the forthcoming Real-Time Rail network with the Bank of Canada and with Payments Canada," Parker-Jones said. "We'll offer real-time payments on the RTR from launch, and, as far as we know, will be the only U.S. bank to do so."
The RTR will enable pay-by-bank services, with funds being drawn directly from users' bank accounts, to be offered as an alternative to card payments.
Open banking, which involves sharing data with third parties such as fintechs, is another area where Chase has a competitive advantage, Parker-Jones said. "As we're a major bank in Europe, we can deploy what we learned about open-banking-based pay-by-bank and real-time payments in Europe to support our Canadian clients," he said.
Chase's plans to expand in Canadian SME payments reflect its global strategy.
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Chase is making major investments in embedded banking so that it can provide additional banking products through third parties such as fintechs, said Parker-Jones. "Chase would be the back-end engine for the fintech's clients," he said.
Parker-Jones sees a huge opportunity in embedded banking in Canada.
"We'll work with our platform provider partners to give SMEs additional financial products that help them manage their finances without leaving the platforms or marketplaces where they transact," he said.
One example is an integration with accounting software platform FreshBooks, which received a strategic investment from Chase in August 2019. FreshBooks is based in Toronto, where most of Chase's embedded banking development team is based.
Chase will offer embedded banking in partnership with FreshBooks initially in the U.S., followed by Canada. This will give FreshBooks' U.S. clients access to underlying Chase infrastructure, including demand deposit accounts and the ability to send and receive payments, said Parker-Jones. Chase plans to offer a similar capability in Canada.
"FreshBooks has a huge audience of SME clients who use its accounting software, and then they have to leave FreshBooks to log into their bank account, which is a disjointed experience," Parker-Jones said. "We'll plug our banking products into FreshBooks' back end so a small business can do all their accounting on FreshBooks and open a Chase bank account directly in FreshBooks. Once they open an account with us, they can send and receive payments using our commercial payments infrastructure."
In 2017, Chase acquired the U.S.-based online payments service provider
"We plan to use WePay in our Canadian business to digitally onboard merchant clients instead of their having to visit a branch with corporate documents and ID," said Marilu Gaudio, Chase's president for merchant services in Canada and a managing director. "In the coming months, we'll use WePay's platform to launch a service enabling Canadian SMEs to digitally create merchant accounts in minutes and then immediately begin accepting payments."
