It looks like Jamie Dimon’s famous fear of fintech has gotten the best of him.
On Thursday, JPMorgan Chase shuttered Frank, a financial aid planning platform for college students, and sued the company’s founder for grossly misrepresenting its customer base by loading it with millions of fake accounts. You might be asking why someone would have the temerity to scam the biggest bank in America, but the real question might be how did JPMorgan CEO Dimon, aka “America’s Banker,” and his team let themselves get flim-flammed?
Broken and Busted
JPMorgan acquired Frank and its creator Charlie Javice for $175 million in 2021. Javice boasted that her site was the “fastest-growing college financial planning platform” used by more than five million students at 6,000 schools. That presented a tempting line into a vein of young blood — that is, potential clients for the megabank, if any of them had actually been Frank users.
After sending out marketing emails to 400,000 Frank customers, 70% bounced back, which is a pretty low hit rate (and we say this as a newsletter). Now JPMorgan alleges Javice and another executive Olver Amar created nearly 4 million fake accounts. While one has to tip their hat to Javice’s “entrepreneurship,” they might also want to ask if JPMorgan could use some help with due diligence: :
- Fintech has more scattered regulations than traditional banks and because of new advancements in technology, firms also have plenty of growth potential. By contrast, banks have limited market distribution, which Dimon has publicly admitted he finds existentially terrifying. That fintech paranoia may have played a role in the bank’s decision to purchase Frank.
- In recent years, JPMorgan has been buying up companies like OpenInvest and Global Shares and investing millions into data groups Kraft Analytics and MioTech to stave off fintech competition. Dimon has also been plowing money into proprietary tech development for a decade. This past December, the bank paid $800 million to acquire a 48.5% stake in the Athens-based payment platform Viva Wallet.
“Banks are facing extensive competition from Silicon Valley, both in the form of fintechs and Big Tech companies,” Dimon told shareholders in 2021.
I’m Tellin’: In other JPMorgan legal news, the bank is asking the courts to keep a former employee from poaching its customers. A complaint alleges, Joseph Michael, who worked for JPMorgan for more than 18 years, breached a contract after he left the company in December and got 32 former clients with assets totaling $28 million to transfer their accounts to his new place of work. Just because Jaime’s paranoid doesn’t mean no one is raiding his staff.