What will the bank of the future look like?

JPMorgan has always been one for making acquisitions that cause other banks to sit up and take notice, even though they may scratch their heads, thinking, 'How does that fit within banking?'

The first one, that perhaps caused other banks to pay attention, was the JPMorgan's $129 million acquisition of Vastera, a global trade management software and service applications provider (otherwise known as trade logistics). Given Vastera's focus on the physical supply chain, some competing banks questioned the value of a bank moving beyond its traditional financing role into the physical supply chain .

JPMorgan has since stated that the Vastera acquisition is not about being in the logistics business, but about positioning the bank and its trade services business, which the Vastera business is integrated with, much earlier in the supply chain to provide firms with greater transparency and visibility around documentary compliance governing the inward and outward flow of goods into particular countries.

Well, as Aite Group points out, information pertaining to the movement of goods can have a knock-on effect on a company's working capital:

"Tying the physical movement of goods to the financial activity surrounding them provides very valuable information to treasurers regarding expected cash flows;this is referred to as the “order-to-cash” cycle."

Not all banks, however, agree with JPMorgan's approach and some have questioned the value of the Vastera acquisition, particularly in terms of whether the bank will gain enough customers from the deal to recoup its investment.

JPMorgan's buying spree in the "order-to-cash" cycle has not stopped there. Recently it announced its acquisition of the business settlement network, Xign, which links suppliers with buyers. JPMorgan already worked with Xign, which provided the e-invoicing component for the bank's proprietary Order-to-Pay Solution. But by buying the business settlement network it has effectively shut out the other banks (Citi, Wachovia, Wells Fargo, et al) that Xign also worked with.

By fully acquiring Xign, JPMorgan Chase is positioned to take advantage of the wide and deep flows of information that are generated by Xign’s network and technology. Assuming JPMorgan Chase can tap into that data with the permission of the trading parties, they are positioned to leverage Xign’s capabilities in ways that other participating banks cannot," Aite Group writes.

For a 'conservative' Wall Street bank, JPMorgan appears to be 'thinking outside the box'. One senior exec within the bank remarked to me recently about the 'strange' things the bank was doing in terms of pursuing non-traditional business lines, including the Vastera acquisition and the bank's foray into document (invoices and cheques) printing and archiving.

It is no secret why banks want to embed themselves deeper into companies' supply chains; they want to make up for revenues lost through declining letter of credit volumes; and they also want the opportunity to sell financing to their customer's (the buyer) suppliers.

However, one has to ask whether some of the solutions banks are developing around the corporate supply chain are what companies are really looking for? Most corporates I have spoken to say they do not want banks to get more involved in their supply chains and that they understand their supply chains better than the banks.

So is all this 'hoopla' surrounding the corporate supply chain about what the banks want or is about solutions corporates are really looking for?