JPMorgan Chase to Buy WePay; Venmo Adds Merchant Payments

Banks and financial technology companies are scrambling for territory in the online payments arena, as they compete to offer the safest and most convenient digital transaction mechanisms for both consumers and merchants.

This week, JPMorgan Chase announced an agreement to acquire WePay, a Redwood City, CA-based company that helps software makers build a payment function into their apps. Terms of the deal weren’t given. But the Wall Street Journal, as cited by CNBC, reported that the purchase price was higher than the $220 million valuation set for WePay in its most recent funding round in 2015.

WePay was founded in 2008 by two Boston College classmates, Rich Aberman and CEO Bill Clerico, whose original idea was to create a group payments system so people could collect and track their friends’ individual contributions toward joint projects like a bachelor party, according to former Xconomy editor Wade Roush’s early story about the company.

The co-founders took WePay through the Y Combinator accelerator program in 2009, and attracted seed investments from August Capital and other backers. But by 2012, the young company had pivoted away from group payments and instead focused on small business clients, who were drawn to the service because it offered such a quick sign-up process, Roush reported. Rather than evaluating the fraud risk of accepting a new merchant through credit checks and other slow, costly means, Aberman and Clerico assessed applicants’ creditworthiness by scrutinizing their social media histories.

Chase, in its announcement on Wednesday, said acquiring WePay will benefit its own business clients as well as the companies that provide their software. Together, Chase and WePay plan to offer small businesses quick onboarding and fraud protection through the payments service. Software makers, by integrating the payments function into their apps via WePay’s application programming interface, could also become payment facilitators or processors. WePay’s current clients include FreshBooks, Constant Contact, and GoFundMe.

WePay had raised more than $74 million up through its Series D financing round in May 2015, according to Crunchbase. Its investors include FTV Capital, Ignition Partners, and Highland Capital Partners.

WePay filled the same niche as Chicago-based Braintree, which was acquired by PayPal in 2013, as TechCrunch reported. San Jose, CA-based PayPal now offers payment portals for merchants, as well as its online payment mechanism for consumers. The company has a separate consumer offering, Venmo, which allows people to quickly send cash to each other just by entering the recipient’s mobile phone number or e-mail address in their own device.

On Tuesday, PayPal announced that Venmo users can also pay for purchases at more than two million online U.S. shops, making the app a more comprehensive “digital wallet,” TechCrunch reported.

Venmo also has an aspiring competitor in the peer-to-peer payments realm—an app called Zelle from Early Warning Services, which is a joint project of more than 30 banks and credit unions, including JPMorgan Chase, Bank of America, Bank of the West, Wells Fargo, Citi, and U.S. Bank.

In September, Early Warning Services reported that Zelle was already operational in the mobile banking apps of more than 10 banks. The other financial institutions are scheduled to go live with the app in the coming months.

Bernadette Tansey is Xconomy's San Francisco Editor. You can reach her at btansey@xconomy.com. Follow @Tansey_Xconomy

Trending on Xconomy