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Long Ideas

JPMorgan Chase Growing with FinTech

JPMorgan Chase (NYSE: JPM) has been on a roll lately. The megabank’s revenues have been growing and its’ digital-payments solution; Chase Pay, is spreading fast.

Walmart (NYSE: WMT) just announced that Chase Pay will be accepted at its discount stores and Sam’s Club membership clubs in the United States next year. That means Chase Pay will be accepted at more than 5,000 brick and mortar locations,, Sam’s Club’s website and presumably; which Walmart acquired over the summer.

Chase Pay is Growing Fast

Chase customers that do not want to wait to next year should be able to access their Chase balances through Walmart Pay right now. That makes Chase the bank to support Walmart Pay.


Nor is it just Walmart, Chase Pay is also accepted by Wakefern an east coast grocery cooperative that owns such brands as Shop Rite and the Fresh Grocer, Business Insider reported. Wakefern’s members own and operate 330 supermarkets.

Other major retailers that accept Chase Pay include Best Buy (NYSE: BBY), Starbucks (NASDAQ: SBUX), and the Shell and Phillips 66 gas stations. Starbucks in particular has been important introducing average people to Mobile Pay.  Starbucks had 7,559 company operated stores and 4,962 licensed locations in the United States in 2015 according to Statista.

Retailers Prefer Chase Pay to Apple Pay

Pushing Chase Pay aggressively is a good move for the bank because Business Insider Intelligence projects that the volume of mobile payments in the United States will grow to $500 billion by 2020. If that prediction is increased mobile payments would increase fivefold in less than four years; rising from around $100 billion in 2016 to $500 billion at the end of the decade.

Chase has established itself as a leader in the mobile payment market with Chase Pay and Chase Net, a mobile payment solution for merchants. It has even managed to penetrate retailers that refuse to take Apple Pay including Walmart and Starbucks. Its’ relationships with Walmart and Wakefern might be the template for adoption of Chase Pay by other major retailers such as Kroger (NYSE: KR), Target (NYSE: TGT) and Costco Wholesale (NASDAQ: COST).


Major retailers prefer Chase Pay because the technology it uses to connect with cash registers QR (quick read) scanning maybe more secure than Apple Pay’s NFC (near-field communications). Chase Pay also limits retailers’ liability because the transaction takes place in Chase’s system rather than the retailer’s. Apple Pay directly accesses the store’s systems, which is one reason why companies like Walmart are so leery of it.

Chase is growing and Making a Lot of Money

For a value investor, Chase Pay is simply icing on the cake, because the monster bank is growing with or without digital payments. In particular, Chase is experiencing some very impressive revenue growth.

Revenues increased by $1.9 billion during third quarter 2016; rising from $93.28 billion in June to $95.18 billion in September. That number is still well below Chase’s revenue high of $99.13 billion from June 2013, but it seems to mark a true recovery. The bank’s business has turned around, but is it making money?


The answer is yes Chase reported a net income of $23.44 billion on September 30; down slightly from $23.96 billion in June and $23.94 billion in September, 2016, but still impressive. It indicates that JPMorgan’s core businesses of consumer banking and investment banking are still generating a lot of cash.

That cash took the form of $4.192 billion in free-cash flow, cash and short-term investments of $417.59 billion, and $87.7 billion in cash from financing on September 30. Chase still has problems though because it reported a negative cash from operations figure of -$2.548 billion.

The bank is trying to correct that by closing costly brick and mortar branches; 161 of them during the first three quarters of 2016. That reduces expenses and improves efficiency by pushing customers to turn to online banking. Other efforts to improve efficiency include the expansion of Chase Pay and Chase.

All this makes Chase a leader in Fintech with access to a fantastic amount of resources. The company had assets of $2.521 trillion on September 30, 2016.

Chase is Still a Great Income Investment

More importantly Chase is still a great income investment. Its shareholders received a dividend of 48¢ on October 4, up from 44¢ in April 2016, 40¢ in 2015, 38¢ in 2014, 30¢ in 2013, and 25¢ in 2012.

That means Chase’s dividend has nearly doubled in just four years, which is impressive. That provided investors with a dividend yield of 2.4% on November 11, 2016. For those looking for share growth Chase offered a return on equity of 10.47% on September 30.

JPMorgan is not only a really great play in Fintech and mobile payments. It is a good growth and income stock; that would fit in well with a portfolio designed for long-term income accumulation.