The Customer Effect
Could Chase be in the beginnings of a mobile payments push?
- Chase has said it won't issue new debit cards instantly at branches anymore, citing an uptick in fraud.
- JPMorgan has been quiet about its mobile payments strategy but the move coincides with some of its mobile payments partnerships.
The fact that JPMorgan Chase customers can no longer replace their lost or stolen debit cards at branches instantly struck industry observers as kind of backwards. Five years after it released the feature, Chase said this week customers will now have to wait up to five business days for the new card to be mailed to them — time that customers in the mobile and digital age just don't have — citing an uptick in card fraud. “When I think of Chase and its competitors — banks with more than $10 billion in assets — 39 percent of banks that fit into that category have [instant issuance] capability,” said Tiffani Montez, retail banking senior analyst at Aite Group. “So they're really going against what has quickly become an industry standard and capability. Their competitors will have it, but now it looks different for Chase.” It’s hard to believe Chase would cut out such an important feature of its retail business -- one so important to at least half of consumers, according to Aite -- without something up its sleeve. Instant issuance was once a nice thing to have but has become more of a must-have for banks wanting to satisfy customers. Chase declined to comment for this story. Chase could be in the beginnings of a potential push by the bank toward consumer mobile payments. In the past year Chase has launched its Chase Pay product with the MCX network and partnered with Level Up to let users order and pay ahead at popular fast-casual restaurants. It’s also entered into a partnership with PayPal that brings Chase Pay into the network of Braintree merchants and supports Chase Pay in the PayPal Wallet with a Chase-issued card. Research by Aite shows banks and credit unions have take notice of the feature’s importance and project it will move more and more into the mainstream between now and 2021. But those that haven't yet adopted it have been holding out for digital solutions, Montez said. Instant issuance will never achieve complete adoption across U.S. financial institutions, she said. “The reason the industry will never see 100 percent adoption of instant issuance at the branch is over time mobile provision will begin to chip away at the need to have this capability in every branch,” she said. Further, executives Montez advises say that while they have instant card issuance for debit cards today, they’re holding out on doing the same for credit cards, planning to support digital or mobile issuance instead of having it available at the branch. "All other solution providers out there that support banks and credit unions with instant issuance solutions -- they're all focused on a digital issuing solution," Montez said. The wallet adoption to support those solutions may not have arrived yet so their potential impact remains to be seen. That itself is a chicken-and-egg problem. Consumers don't yet have the incentive to break the old habit of taking out their wallets and pulling out their plastic cards and don't truly seem to care enough about the safety of their data. They may care about the safety of their funds, but trust their institutions to reimburse them for fraudulent transactions. For example, when banks began re-issuing cards with chips instead of magstripes — that would ostensibly ensure more secure payments that would show lower rates of fraudulent activity — customers largely saw it as a nuisance. Some retailers had implemented the hardware needed to accept chip cards, some still haven’t. Integrations have been flaky, making the checkout experience longer than they were used to. The payment experience was inconsistent. But the right incentives, something along the lines of a rewards scheme, along with a smoother checkout experience like that of Apple Pay might drive consumers toward mobile payments. “I don't know if banks and credit unions have nailed down their strategies around that. What hinges around their strategies are consumers’ willingness to actually do it.”