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JPMorgan Expands Into Healthcare Payments, to Buy InstaMed

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In order to expand its reach into lucrative U.S. healthcare payments market, JPMorgan (JPM - Free Report) 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 bank’s biggest acquisition since the 2008 financial crisis).

Founded in 2004, Philadelphia-based InstaMed offers automated billing services linking hospitals and doctors’ 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 JPMorgan’s huge corporate payments infrastructure, which processes approximately $6 trillion of payments on a daily basis.

Takis Georgakopoulos, JPMorgan’s Global Head of Wholesale Payments, said, “We’ve 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 Chase’s payments capabilities with a leading healthcare payments solution for consumers, providers and payers.”

JPMorgan plans to offer InstaMed to its entire client base and will likely integrate it with its bill paying apps. Georgakopoulos commented, “The idea is, you take their platform and our payments expertise and you bring it together as one package to our customers.”

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, JPMorgan’s 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 “delivers payments-as-a-service APIs for simple onboarding and activation of payments, without impacting the user experience designed by developers.”

Additionally, over the past few months, some of the largest U.S. financial institutions, including Goldman Sachs (GS - Free Report) and Morgan Stanley (MS - Free Report) have announced deals that are aimed at diversifying operations amid a tough operating backdrop. Further, BB&T’s (BBT - Free Report) planned takeover of SunTrust in “merger of equals” deal will likely give significant competition to the big banks including JPMorgan, Bank of America and Citigroup.

Therefore, amid such an operation environment, JPMorgan’s 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 industry’s rise of 11.6%.

Currently, JPMorgan carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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