October 28, 2015
At the Money 20/20 event held recently in Las Vegas, America’s largest bank by assets JPMorgan Chase & Co. announced the launch of its own digital wallet dubbed Chase Pay. It is scheduled for launch during mid-2016. MCX—which includes retailers such as Walmart, Target, Best Buy and Shell—will be Chase Pay's premier partner. Chase Pay will now be entering the race with Apple Pay, Android Pay and Samsung Pay. Chase Pay is stated to provide a better payments experience to millions of customers, processing 34 million transactions each day on an average with Chase banking.
One out of every two households in the US is a Chase customer. All Chase customers will be able to use Chase Pay to pay online, in-store and in-app payments. In certain locations, like restaurants, consumers will be able to use their smartphone to take a picture of a receipt and pay with Chase Pay. Chase also plans to integrate loyalty programs and coupons within its digital wallet.
Since Chase is partnering with Merchant Customer Exchange (MCX), Chase Pay will be progressively rolled out to merchants who represent 100,000 retail locations in the US and are already accepting payments via MCX’s express checkout app, CurrentC. Chase customers will be able to use Chase Pay wherever CurrentC is accepted—either directly, or through the CurrentC app. Brian Mooney, CEO of MCX, said, Our partnership links Chase and its customer base with CurrentC’s extensive network of leading retailers, restaurants, grocery stores and fueling stations, which process over a trillion dollars in transactions annually at more than 100,000 US locations. This is a significant milestone, not just for MCX and Chase, but for mobile payments overall as the industry continues to take shape. Everywhere CurrentC is accepted, Chase Pay will be accepted.
Chase is also partnering with 17 technology vendors like Aria, BridgePay and LevelUp so that merchants who are not Chase Commerce Solutions clients can also participate in Chase Pay. For merchants, it’s a win-win situation. Chase will not charge the merchants for additional fees like network fee, merchant processing fee and merchant fraud liability fee.
While talking about the low costs for merchants in an interview with Bloomberg News, Gordon Smith, Head of JPMorgan Chase's consumer bank, said, "There’s no network fees, no merchant-acquiring fees, we will not charge them back for fraud once we’ve approved a transaction, and we will also give them the opportunity to drive down further their cost of acceptance based on how much volume they do with Chase. How is this possible? Chase Pay can be used by only Chase customers; because of this, Chase has a control over both the sides of the transactions. Both the sender and receiver will be a part of Chase’s network. Chase is willing to accept a lower fee for Chase Pay transactions than for other transactions. The specific pricing is still not out but Chase will definitely keep it low to gain momentum amongst the merchants. On the other hand, merchants using Android Pay will still pay standard processing charges to their processor and regular credit card transaction fee to merchant acquirer. Merchants using Apple Pay will not be charged anything extra but most merchants in the US still don’t have Apple Pay is because of the costs associated with installing an NFC-enabled POS and training of employees. Chase is not the first bank to come up with a digital wallet. Last week, Capital One announced a similar tap-to-pay feature within its existing Capital One Wallet app. The tap-to-pay feature of the Capital One Wallet app works on NFC-supported devices. Now, the question is: are tech companies like Google and Apple are becoming banks, or are banks treating themselves as tech companies? Is Chase Pay bad news for Apple and Google? What actions will Citi, Bank of America and Wells Fargo take? Money 20/20 of 2016 will be very interesting and full of surprising announcements.
One more thing to note is that Chase Pay will not be using contactless NFC technology for accepting payments; it will use QR codes instead. The other question that arises is: is Chase Pay too late in the market? The payments world can flip upside down eight months from now. While the world is moving away from QR codes and adopting NFC for rapid processing, will users spend time opening the app and waiting for QR codes to be scanned as opposed to NFC’s quick tap-and-pay feature? It’s apparent that Apple Pay hasn’t been well adopted by merchants as it was expected to. Out of the 98 largest brick-and-mortar retailers in the US, nearly two-thirds told Reuters that they did not have plans to support Apple Pay this year. Only 4% had pledged to accept it by the end of the year. These figures and analysis raise doubts on Chase Pay’s success in the US.