U.S. bank JP Morgan Chase is to acquire British online asset manager Nutmeg. The largest bank in the U.S. hugged a leading company in the U.K., the home of fintech. Analysts say JP Morgan showed signal to expand retail banking outside the U.S.
According to Bloomberg, JP Morgan announced that it had agreed to an acquisition negotiation with Nutmeg on the same day. The acquisition will also complement the plan to launch a standalone digital bank under the JP Morgan brand later this year.
“We are building JP Morgan Chase from scratch in the UK using the latest technology,” said Sanoke Biswaner, CEO of JP Morgan International Consumer Division. “We put our customers’ experiences at the center of our products, and Nutmeg shares principles with us.”
Although the amount has not been disclosed, the market sees Nutmeg as valued at ?700 million.
Nutmeg started its business in 2012. It has grown into one of Britain’s biggest online investment management platforms by utilizing Robo-Advisor. More than 140,000 customers and assets are estimated to be about £3.5 billion. It deals with products such as individual savings accounts (ISA) and pensions. However, it has yet to make a profit, recording a loss of ?22 million in 2019.
JP Morgan signed an agreement in November last year to provide ETF (Traded Index Fund) to NutMeg, which it helped develop. It is pointed out that JP Morgan is trying to keep up with not only its traditional rivals such as Goldman Sachs and Morgan Stanley but also its rapidly emerging fintech companies.
Jamie Dimon, CEO of JP Morgan, said last year, “We will be much more aggressive in finding a target to help double our capabilities.”
CNBC believes that Morgan Stanley’s $20 billion investment in recent years may have motivated CEO Dimon by acquiring online securities firm Etrade and asset management firm Eaton Vance. CEO Dimon had previously called for preparation for fintech of large technology companies including PayPal and Alphabet.
If JP Morgan launches its retail banking business in the UK, it will compete with the consumer financial brand Marcus, which Goldman Sachs released in 2018. It is heard that Goldman Sachs will also provide RoboAdvisor service to Marcus’ customers in first quarter of next year.
Banking experts said, “Nutmeg’s consumers are relatively small compared to major banks, but it will provide an early user base for JP Morgan, which does not yet have consumers in the UK.”
JP Morgan’s acquisition is also an attempt to expand its digital asset management services overseas based on the UK.
“It will serve as the basis for JP Morgan’s international retail digital asset management service,” Nutmeg said in a statement.
JP Morgan explained that the acquisition of Nutmeg without using investment technology already developed in the U.S. is due to different regulatory requirements in Britain and Europe.
CNBC reported that Britain’s fintech market attracted $4.1 billion in venture capital last year and is considered the world’s largest market.