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JPMorgan's start-up partner was 'blown away' by Dimon's letter

JPMorgan Chase CEO Jamie Dimon attends a policy forum with President Donald Trump in the State Dining Room at the White House, Feb. 3, 2017, in Washington.
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JPMorgan Chase CEO Jamie Dimon attends a policy forum with President Donald Trump in the State Dining Room at the White House, Feb. 3, 2017, in Washington.

Ryan Falvey knew his organization, the Center for Financial Services Innovation, was highly regarded at JPMorgan, but he was shocked to see it so prominently featured in CEO Jamie Dimon's annual shareholder letter.

Falvey joined the non-profit CFSI in 2014 to lead the Financial Solutions Lab, a $30 million initiative from JPMorgan aimed at funding projects that could improve consumers' financial health. The lab is investing in nine start-ups a year.

Dimon called out CFSI and the lab on page 10 of Tuesday's 46-page shareholder letter, highlighting it as a centerpiece of the bank's focus on technology and innovation. Of the company's $9.5 billion investment in tech last year, $600 million went to fintech initiatives, including CFSI, Dimon said.

CFSI, whose projects "help consumers manage their daily finances and meet their long-term goals," have supported 18 companies that have gone on to collectively raise $100 million in follow-on capital, Dimon wrote.

"I was completely blown away," said Falvey, a managing director at CFSI, in an interview on Wednesday. Falvey said that when he was told CFSI was in the letter, "I was expecting it to be on page 60 of corporate responsibilities."

For Dimon, technology has become a central talking point and strategic priority. In addition to the bank's embrace of Silicon Valley start-ups, JPMorgan is turning into a sophisticated tech shop for its internal efforts.

The lead section in the addendum to Dimon's shareholder letter carried the title, "Technology continues to fuel everything we do."

It reads like a recruiting brochure for engineers. The company is focused on "cloud and agile development," "iterative" software development, "end-to-end automation," and its first "state-of-the-art" data center that opened this year where "hardware commoditization already has reduced our server costs by 25 percent."

JPMorgan's five-year $30 million commitment to CFSI is part of its corporate responsibility program. Any future financial gains from CFSI's investments would go back to funding the non-profit, Falvey said, and not to the bank's balance sheet.

The biggest success to come out of the lab so far is Digit, an automated savings app that's raised over $36 million in venture funding. Other companies to gain some traction include Propel, which simplifies the process of getting food stamps, and Remedy, whose software aims to help consumers avoid overpaying on their medical bills.

When the first cohort of companies was chosen in 2015, Dimon was in attendance in New York to meet all the finalists and provide feedback, Falvey said. CFSI is currently accepting applications for its third class and will announce the winners at its annual Emerge conference in June.

The start-ups that are chosen will spend eight months with CFSI in an effort to accelerate their businesses. The program includes a briefing with regulators in Washington and meetings with partner companies ranging from financial firms to technology providers Alphabet and Amazon.

Falvey said that by giving CFSI such valuable ink in Dimon's widely read letter, the CEO is showing that he's promoting -- rather than fighting -- the rapid transformation in banking.

"It's emblematic of how JPMorgan Chase increasingly sees this work as being somewhat central to understanding pretty significant changes in consumer behavior," Falvey said.