In order to expand its reach into lucrative U.S.
healthcare payments market, JPMorgan JPM has inked
a deal to acquire InstaMed. Though the financial terms of the deal
were not disclosed, CNBC reported the value to be more than $500
million (making it the bankâs biggest acquisition since the 2008
financial crisis).
Founded in 2004, Philadelphia-based InstaMed offers automated
billing services linking hospitals and doctorsâ offices with
patients and insurers. The firm has nearly 300 employees and
processed $94 billion worth of transactions last year.
The deal will, thus, complement JPMorganâs huge corporate payments
infrastructure, which processes approximately $6 trillion of
payments on a daily basis.
Takis Georgakopoulos, JPMorganâs Global Head of Wholesale Payments,
said, âWeâve made significant investments in our Wholesale Payments
business over the years and this acquisition will give us a unique
advantage in one of the fastest growing sectors. With InstaMed, we
combine the strength and scale of JPMorgan Chaseâs payments
capabilities with a leading healthcare payments solution for
consumers, providers and payers.â
JPMorgan plans to offer InstaMed to its entire client base and will
likely integrate it with its bill paying apps. Georgakopoulos
commented, âThe idea is, you take their platform and our payments
expertise and you bring it together as one package to our
customers.â
Per the NHE Fact Sheet, healthcare spending was $3.5 trillion in
2017, and this is projected to grow at average rate of 5.5% per
year over the next decade to reach roughly $6 trillion by 2027.
Therefore, JPMorganâs plan will further diversify operations and
help it make inroads into the global payments business.
Our Take
The deal indicates that JPMorgan is finally looking forward to
opportunistic acquisitions to further enhance top line and keep
pace with the increasing use of technology to drive growth. The
only other notable acquisition done by the company was its 2017
buyout of WePay, which âdelivers payments-as-a-service APIs for
simple onboarding and activation of payments, without impacting the
user experience designed by developers.â
Additionally, over the past few months, some of the largest U.S.
financial institutions, including Goldman Sachs GS and Morgan
Stanley MS have announced deals that are aimed at diversifying
operations amid a tough operating backdrop. Further, BB&Tâs BBT
planned takeover of SunTrust in âmerger of equalsâ deal will likely
give significant competition to the big banks including JPMorgan,
Bank of America and Citigroup.
Therefore, amid such an operation environment, JPMorganâs
opportunistic acquisition of InstaMed will go a long way in
supporting its financials. Further, it must be noted that this
effort is totally separate from Haven (a joint venture between
JPMorgan, Amazon and Berkshire Hathaway that was announced in
2018), which is aimed at lowering healthcare costs for these
companies' 1.2 million workforce.
Shares of JPMorgan have rallied 13.5% so far this year,
outperforming the industryâs rise of 11.6%.
Currently, JPMorgan carries a Zacks Rank #3 (Hold). You can see
the complete list of todayâs Zacks #1 Rank (Strong Buy)
stocks here.
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