Always Measure Twice: JP Morgan Burned by 31-year-old
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Always Measure Twice: JP Morgan Burned by 31-year-old
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By most measures, JP Morgan is the largest financial institution in the world. It has more than 250,000 employees and does business in almost every country on the planet. JPM acquired a small company called Frank Financial that was owned and operated by 31-year old Charlie Javice. For JPM, the rationale for the acquisition of Frank was that it provided JPM greater reach into the population of college-bound young adults that used Frank for help with financial aid. By acquiring this client base, JPM would have the opportunity to penetrate this Generation Z population and have them start using JPM’s credit cards, bank accounts, stock-trading functions, auto loans, home mortgages, and more. Seemed to make a lot of sense at the strategic level for JPM.
In the case of Frank, JPM thought it was acquiring a profitable business with 4.2 million new accounts as targets for the menu of JPM services. These accounts were listed in a database and included name, address, and other personal information on each account. After the acquisition closed and $175 million changed hands, JPM discovered a disturbing fact about those 4.2 million accounts: more than 90% of them were fabricated. Oops.
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