JPMorgan executive on how payments are 'eating the world'

Every business is a payments business.

That’s the premise under which Jeremy Balkin, global head of innovation and corporate development at J.P. Morgan Payments, operates. It means that any merchant is reliant on the ability to send and receive money quickly and safely, a concept that Balkin says is at the root of such innovations as cars becoming payment vehicles.

Balkin joined JPMorgan Chase in March, after six years at HSBC USA, a unit of HSBC Holdings in London. As chief innovation officer at HSBC, he led the charge to install a customer service robot nicknamed Pepper in branches and distribute smartwatches among employees so they could seamlessly communicate amongst each other. Balkin was named a Digital Banker of the Year finalist in 2019 for these efforts.

Now he is turning his attention to payments, where he makes decisions about which companies the bank will invest in and how it can enhance money transfer systems between businesses. He will lay out his vision of what banking and fintech innovation will look like in the future at American Banker's 2021 Digital Banking conference next week.

In an interview, Balkin explained how payments are the bedrock of every business, which trends banks are paying attention to, and how he envisions the future of payments.

You’ve been in your role as global head of innovation and corporate development in payments at J.P. Morgan Payments for about eight months. What does the role involve?

JEREMY BALKIN: Our team looks after the future innovation of J.P. Morgan Payments. We screen investments, including mergers and acquisitions; we develop strategy and insights; and we oversee payments innovation and R&D as we think about next-generation payment experiences. We have clients all over the world.

If you think about what we have learned over the last two years from the global pandemic, every business is a payment business. When you exchange data and value, that’s a payment. The payments business has historically been considered a little sleepy, but now it is arguably the most exciting part of financial services.

What does it mean that every business is a payments business?

A merchant will not be in business unless they can receive or send money. Whatever the industry is, it’s almost secondary to that fundamental need to pay or be paid. That recognition has become a reality over the last few years. Almost overnight [during the pandemic] we went from a physical to a virtual existence and some businesses that historically relied on a business-to-business model had to go direct to consumer to survive. We’ve seen accelerated trends in digital behaviors across almost every industry. Think about the phenomenal rise of e-commerce in the last year alone. Those trends are unlikely to reverse. Folks have been forced to use digital channels maybe for the first time in a crisis, but by the umpteenth time they’ve used digital channels for purchasing or consuming, it becomes the preferred method.

What has JPMorgan been doing in this space? One project that comes to mind is your Request for Pay platform, which enables immediate wholesale payments between companies or certain consumer-to-business transactions.

Another thing I find particularly interesting is how we think about the car as no longer just a traditional vehicle but a wallet on wheels. We recently took a 75% stake in Volkswagen Payments [a digital payments service that enables initial purchasing and leasing and in-vehicle payments]. We believe the mobility ecosystem is a new payments ecosystem that has yet to fully mature. If you think about the idle time a consumer spends in a vehicle from Point A to Point B, it’s not the most efficient use of time. Imagine you could use that time to pay for gas, to buy consumer goods.

The purpose of payments is to transfer data and value. If you apply that premise to other industries that have yet to think of themselves as a payment business first, that is exciting. Looking into the future, imagine a payment experience where the consumer doesn’t need cash, card or a phone to make a payment. Imagine integrating biometric data so facial recognition could authenticate a payment. Imagine how much more efficient your physical experience would be at a restaurant or lining up at a Starbucks. These technologies all exist today.

Banks that can do both banking and payments will likely be most relevant in the new economy. Think about how far the world has come in a decade. In 2010, the fastest way to move money from New York to London on the same day was to get on a plane at JFK early in the morning, land at Heathrow in the afternoon and pay a merchant yourself. In 2021 you can move money from New York to anywhere, including space, in real time in a fraction of a second and at virtually no cost because of how far the technology has intersected and transformed payments.

What is your approach when it comes to investing in other companies, partnering with fintechs, or building capabilities in-house?

Across the firm we do all three, depending on the line of business and circumstances. In addition to Volkswagen Payments, we made an investment in PPRO, an alternative method of payments provider earlier this year. In total J.P. Morgan Payments has investments in 19 fintech companies and that portfolio is growing.

What will you be covering during your Digital Banking conference keynote?

I focus on three areas to demonstrate why we believe that “payments are eating the world” and every business is a payments business at the core. There is the car wallet-on-wheels analogy, the rise of the super app — a concept that is much bigger in Asia but is coming to the U.S. — and the rise of the “creator economy,” where 2 million Americans made a six-figure income monetizing their creativity on platforms like TikTok, YouTube and Instagram with smartphones. Monetizing creativity would have been unheard of 10 years ago, but now individuals can effectively become a small business when you have real-time payments and low-cost methods of payments enabled with technology integrated in these major platforms.

You’ve focused some of your research on millennials. How well are financial services catering to millennials and are there changes they have had to make to serve Generation Z as well?

There are something like 170 million Americans under the age of 40. Any industry has to adapt to the reality that the core influencers are those under 40. This demographic tends to have different expectations for service and the length of time it takes to do almost anything. I think our industry has done a great job of adapting. At the average bank conference in 2015 or 2016, there was almost this adversarial relationship between fintech and incumbent banks. In 2021, and I’m sure this will be true next week at Digital Banking, it’s all about collaboration and partnership. There is a recognition that we all share the same customer, who is less concerned about who is providing service at the back end but wants to know their money is safe and accessible.