In a bid to enhance its appeal to small business customers, JPMorgan Chase (NYSE:JPM) is planning to offer digital payroll processing by the end of 2024. The bank has chosen Gusto, a San Francisco-based fintech company, to provide the underlying technology for this feature. This move will position JPMorgan to compete more effectively with fintech firms such as Square (NYSE:SQ) and PayPal (NASDAQ:PYPL), which already offer payroll services.
The new product will allow customers of Chase payment solutions to access payroll services from the same platform where they conduct their banking. "It's the same experience, with the same login and credentialing; all that stuff becomes easier when it's in a one-stop-shop-type environment," Gusto CEO Josh Reeves explained on Thursday.
This initiative forms part of JPMorgan's broader strategy to win over American retail and business customers. The bank has invested billions in technology over recent years, aiming to stay competitive as fintech companies like PayPal and Square expand their scope of services.
JPMorgan has previously introduced fintech features such as a Square-like credit card reader for small businesses and early direct deposit for consumers. However, when it came to payroll—a universal challenge for small business owners—the bank decided to partner with Gusto instead of developing its own solution.
Gusto's expertise in managing the complexities of offering payroll services nationwide was cited as a key reason for the partnership. The sector's nuances vary across individual states, cities, and counties, making it difficult for a single entity to navigate.
The upcoming service will disburse salaries to employees, generate tax documents and pay stubs, and file these documents with local and national agencies. The bank currently boasts 5 million small business customers and more than 200,000 users of its payment solutions offering.
Established in 2011, Gusto serves 300,000 small and medium businesses and was last valued at $9.6 billion. The startup competes with traditional and newer providers including ADP (NASDAQ:ADP), Intuit (NASDAQ:INTU), Paychex (NASDAQ:PAYX), and Rippling.
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