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JP Morgan Chase has acquired digital wealth manager Nutmeg for £700m. The American financial giant is launching a digital bank in the UK later this year.

The deal will provide JP Morgan with a suite of retail investment tools including Nutmeg’s automated “robo-advisor”, along with ISA and retirement products.

JP Morgan will also instantly gain access to Nutmeg’s customer base of 140,000 investors, although Nutmeg will continue to be run separately. The acquisition is expected to close later this year, pending regulatory approval.

The Wall Street giant’s long-anticipated UK retail bank, called Chase, will be available via app only this autumn. It’s intended to compete with digital challenger banks such as Monzo and Starling.

Chase will also be in direct competition with Marcus, a digital savings bank launched by Goldman Sachs three years ago that attracted more than half a million customers on opening.

Sanoke Viswanathan, CEO of international consumer at JP Morgan Chase, said: “We are building Chase in the UK from scratch using the very latest technology and putting the customer’s experience at the heart of our offering, principles that Nutmeg shares with us.”

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Nutmeg will sit alongside Chase, with opportunities to cross-sell investment products with Chase’s current accounts. The pair have previously worked together to offer diversified portfolio products.

While Chase will have no physical branches, it will have a customer contact centre based in Edinburgh.

Founded in 2012, Nutmeg has grown into a company with £3.5bn in assets and is seen as one of the UK’s promising fintech startups. However, the company has yet to make a profit.

“Nutmeg will form the bedrock of the bank’s retail digital wealth management offering internationally over the long term, complementing the launch of Chase as a digital bank in the UK later this year,” said Nutmeg CEO Neil Alexander in a blog post.

He added: “Nutmeg’s customers can expect the same level of transparency, convenience and service that helped make us a leading digital wealth manager in the UK.”

JP Morgan’s clout as the biggest consumer bank in the US may help encourage UK savers to make Chase their primary account which their salary is paid into – something that existing challenger banks have struggled to achieve.

Nutmeg has raised a total of $153.6m in funding, some from 2,100 private investors who backed it in a crowdfunding round two years ago and are expected to receive a payout from the acquisition.

Goldman Sachs acquired a 10% stake in Nutmeg during previous financing rounds, giving JP Morgan’s traditional rival a windfall from the deal.

Last year Starling announced an integration with Nutmeg, but it is unclear if that will continue following the acquisition by Chase. Verdict has approached Starling for comment.

The news comes as payments company Wise announced plans for a direct listing in London in a boost for the UK’s fintech sector.