The shift to an increasingly online, digital economy is creating new opportunities and considerations for treasury operations. One of the biggest new developments is third-party money (3PM)—managing cash that does not belong to your company.
Third-party money or 3PM, it's a part of Treasury with immense opportunity. That's why we gathered these three JPMorgan leaders to explain it in under three minutes. Ready? So tell us, what is third-party money?
I'm so glad you asked. Third-party money, or 3PM, is when companies process payments or hold cash that doesn't belong to them, but to a third party, like customers, sellers, or other partners.
So imagine a ride hailing app. They hold cash to pay out their drivers, right? But if they evolve to offer more services like food delivery, 3PM comes into play as the company connects the customer and the restaurants without becoming owner of the product itself, or as we know, marketplaces.
But if they're already holding cash for drivers, why do they need to think about 3PM?
Because handling a third-party cash like restaurants is very different than managing your own. For one, it needs to be segregated and accounted for differently. It never touches their income statement.
And companies want to get involved in 3PM because?
It's good for business. Think new revenue streams, differentiated value proposition, more market information, all of which lead to higher returns.
In other words?
In other words, the power to grow and become more relevant to your customer in a digital way.
And if I'm a treasurer, what does 3PM mean for me exactly?
Well, it means the most for you.
Be more specific? 3PM often means licensing, specialized liquidity treatment, and enhanced payments, which can vary around the world.
That sounds like a lot of work.
No, no, that's why we're here.
And by we, you mean?
JP Morgan. For decades, we've helped clients around the world hold and transact third-party cash. We go beyond the transaction to help you identify new revenue streams and connect commercial considerations to your Treasury ecosystem. So you can navigate this changing environment and achieve your e-commerce dreams.
Wow, so basically, companies are handling more and more money that isn't their own. And JPMorgan is the partner to help them navigate this new terrain.
Exactly, you got it.
In under three minutes--
With three JP Morgan leaders.
Third-party money or 3PM. It's a part of treasury with immense opportunity. That's why we gathered these three J.P. Morgan leaders to explain it in under three minutes. Ready? So just a refresher on third-party money. It's when a company handles money that isn't its own, but which industry is 3PM impacting the most?
Nearly every industry. Digital transformation and e-commerce are growth opportunities for all businesses these days, and 3PM is just one part of this broader shift.
A shift. Why don't you set the stage?
So for the last two decades, companies started as digital first dominated e-commerce.
Then the pandemic hit and businesses had to pivot.
And the result has been
In one word, massive. We've seen a network effect where customers, suppliers, and providers are more digital forward, and increasing demand for services like instant payments and digital wallets.
But this hasn't really affected brick and mortar?
No, it has.
In fact, some of the most interesting opportunities for 3PM have been disrupting the traditional brick and mortar.
For example, think of a consumer packaged goods business. Customer returns are complicated and leave both parties unhappy. The merchant didn't sell its goods and it takes a lot of time for the customer to get back their money.
Enter the digital wallet. Instead of processing a traditional return, you can apply the refunded amount immediately and keep your customer in your ecosystem. Complement the digital wallet with a 10% off coupon and chances are your customer will buy again.
Oh, very cool. But how exactly is that 3PM?
Because the cash never leaves the company.
Right because they're storing it in a digital wallet.
Exactly. It may need to be accounted for differently, but it's still with you.
This is a big change. So I'm guessing there must be some real benefits to 3PM.
There are. Think about it with a good 3PM strategy, you enable your business to grow. E-commerce allows you to grow your business better, faster, cheaper, and reach new customers globally with enhanced data.
So huge growth potential?
You got it. It's a ripple effect. Business leaders know where the cash is and where it's going, which helps improve liquidity management.
OK, but you three are from J. P. Morgan?
So where do you come into play?
There's a lot to consider for any company when creating a 3PM strategy. We've been a leader in 3PM for decades making us a trusted partner for clients across all industries worldwide.
So basically, 3PM is part of a broader e-commerce story that presents massive business and growth opportunities.
And because of its 3 PM leadership worldwide J. P. Morgan is the partner to help companies of any size in any industry.
In under 3 minutes
With three J. P. Morgan leaders.
Corporate treasurers have to think about a number of areas when tasked with managing a flow of funds destined for different receivers, including:
Setting up more accounts totake care of divergent fundflows
Paying out cash to multipleexternal businesses
Aligning with different licensingor regulatory models
Maintaining the separation offund types without sacrificing visibility and efficiency
Third-party money, or 3PM-- it's a part of treasury with immense opportunity. That's why we gathered these three JPMorgan leaders to explain it in under three minutes. Ready?
So third-party money is when a company handles money that isn't its own. But what are some of the geographic implications of 3PM?
So many. That's because most businesses using 3PM are operating across different countries.
And it's working across different markets that adds complexity.
Exactly. It increases the legal risk and regulatory considerations.
Especially when you compare it to handling your own working capital. It's night and day.
Because it's third-party money, not your own.
So things like licensing requirements and safeguarding-- all of that becomes much more important.
You know what I'm going to ask.
For example, say a marketplace operating in one country decides to expand its reach-- new country, new requirements. Remember 3PM is someone else's cash.
As a result, each country is going to have rules around how you can transact with 3PM. Some may involve licensing, others may controls how you market to your customer, but all are important to enabling your business to expand its reach.
So take safeguarding, there are geographic considerations there?
Yes. Just like the overall 3PM landscape, safeguarding rules differ by country.
Well, some countries require that 3PM is segregated in accounts, others specify the currency in which it needs to be held. Segregation can also be a contractual relationship between the company and their customers, even when it is not a regulatory requirement.
The goals are the same-- visibility, control, and optimization-- but the solutions to achieve may vary.
That's a lot to consider and that's just one 3PM implication.
True, but that's also why we're here.
The three of you or all of JPMorgan?
Well, us, but also all of JPMorgan.
We know how challenging growing your business globally can seem, so we work hand in hand with clients to find the right solution for their needs.
In the short-term and the long-term.
And you've got the experience?
We do. We've worked with 3PM worldwide and understand the journey across countries. Whenever we expand our 3PM solutions into new geographies, we work diligently to fully understand the landscape. And we ensure our products are built for today and fit for tomorrow.
And clients are generally happy taking on a 3PM strategy?
Very much so. 3PM is inherent to your digital journey.
Got it. So 3PM almost always operates across different jurisdictions, but JPMorgan is there to help clients every step of the way.
Exactly, you got it.
In under three minutes--
With three JPMorgan leaders.
As 3PM becomes more important, the role of corporate treasury will continue to evolve, shifting the primary focus from areas like multicurrency management and risk management to encompassing settlement optimization, frictionless payments and complex new account structures. Opportunities include: