Always Measure Twice: JP Morgan Burned by 31-year old. Part 2, Lessons Learned.

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.