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As mobile payments expand, Chase Pay seeks to differentiate

Chase has been fairly quiet about Chase Pay, and is taking a small guy approach that focuses on adding value through merchant partners.

After giving a year’s warning about its imminent launch and then finally going live last October, it still feels very under the radar. It’s not marketing on social media. It’s not pushing its mobile banking users to the Chase Pay app. It’s not drawing any attention to itself.

“We purposefully have been saying we want to mirror what some of the best apps out there have done and think like a small guy a little bit in that we want get the product right and roll it out as it’s ready to the right audiences,” said Dina DeMerell, chief marketing officer at Chase Pay. “We’ve been rolling out in a measured way as features and functionality and merchants become available.”

Today, Chase Pay’s largest merchants partners include Best Buy and Starbucks — both of which let users order and pay in advance. Shell stations will join the network later this summer, according to the bank, as well as HMS Host, Atom Tickets and Parkmobile later this year. Higher end (or just “fancy”) restaurant chains in the Level Up network — with whom Chase Pay partnered in December — have been added too now, like Sweetgreen, By Chloe, Georgetown Cupcake and Fika. Earlier this year, it acquired MCX, a retailer consortium with members like Walmart and Target.

However, while the main players are playing for customer convenience — why fumble through a wallet for a piece of plastic when a customer can just tap the device that’s probably already in hand? — Chase is looking to create new value propositions for customers: offers, discounts, things that motivate a person to actually break the old habit of paying by card and creating a new habit: paying by phone.

Through the app, available only to Chase debit and credit card holders, customers can order ahead from participating restaurants, receive discounts on their order and pay for it before they arrive to pick it up; they can pay for things using Chase Ultimate Rewards points or cashback rewards; in Denver and Boston, Chase Pay is testing a feature that will allow users to save money by rounding down their bill whenever they order ahead.

“Order-ahead is a feature that can get people to use to because it actually improves the life of the customer,” said David True, a partner at PayGility Advisors. “Just switching from swiping to scanning doesn’t change a customers life or make the experience any better.” And even if the food companies have their own apps, this gives users an incentive to use Chase instead.

Since Chase announced the Pay product in 2015, Samsung Pay has added in-app payments and location-based discounts and offers, Facebook Messenger added support for group payments between friends, Starbucks introduced an order-ahead capability in its app, China’s Alipay and WeChat both arrived in the U.S. Last week, Apple Pay revealed its digital debit card and peer-to-peer payment function through iMessage. This week Zelle is coming for Venmo users through their mobile banking apps.

“Other apps have been successful and done best when they grow up slowly and get it right first, before they start marketing,” DeMerell said.

However, competing with other mobile pay products isn’t Chase’s game. Similar to Apple’s p-to-p play, Chase Pay adds value to its 26 million existing Chase customers that are digitally active on the mobile banking app. “Customers are going to decide what they want to use most,” DeMerell said. “Right now it’s important we offer a Chase solution anywhere a customer might go.”

On some level, the Apple, Samsung and Android Pay products are in direct competition with Chase Pay. Chase is playing in that space too.

“We’re supporting those products actively, we want customers to select Chase as their payment method for apple or Samsung pay. If that’s the product the customer wants to use we want to make it easy for them to connect with Chase,” she said.

After all, the merchant appeal for providing Chase Pay as a customer payment option is that they pay lower transaction fees on Chase Pay purchases than on those made with other payment methods — like the Apple, Samsung or Android Pays.

“For all of these players trying to replace plastic at the point of sale are doing it, it’s an add-on,” said True. “[It’s] hardware in Amazon’s case, probably in Samsung’s too; collecting data in Google’s case. The merchant doesn’t want to turn away any form of payments. Chase isn’t going to push it on merchants because how they make money on merchants is otherwise. They’re not going to push people hard to use this Chase Pay app.”

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How Chase is tackling mobile payments

Unlike many banks, Chase is focused on mobile payments, with its four-month-old Chase Pay product.

Late last week, it acquired MCX, a retailer consortium with members like Walmart, Target and Best Buy, its second mobile payments acquisition. Three months ago, Chase partnered with LevelUp, a mobile payments app geared at smaller retailers on the East Coast. The MCX deal is not surprising; Chase announced its Chase Pay product in October 2015, a full year before it became available to its customers, and said at the time that it would be using MCX’s technology.

“The [MCX] deal provides Chase with an important entry point into many of the largest merchants in the U.S., as well as the appropriate technology to integrate with those outside the MCX consortium, but does not guarantee its prospects for adoption,” said Jordan McKee, a principal analyst in 451 Research’s payments practice, in a report on the acquisition.

Retailers in the MCX network are some of the largest in the U.S., which should help drive Chase Pay activity. Those companies don’t accept rival wallets like Apple Pay, so Chase doesn’t appear to be in competition for consumers. However, Chase offers its businesses fixed pricing without the usual fees for interchange, merchant processing or network processing, which would make Chase Pay more appealing to businesses than its rivals, but consumer adoption of any mobile payments still hasn’t really taken off.

There are many reasons mobile payments haven’t reached their tipping point yet. They’re not seamless; placing a mobile device in exactly the right position can be trickier than it should be. It’s hard to make new payments technology run on old, rusty rails. The development of payments infrastructure, at least in the U.S., has been too slow to keep up with consumers’ current standards for fast and secure payments. As payments become increasingly sophisticated, hackers do too and new features meant to tighten data privacy in payments can only be useful for so long.

Existing mobile payments experiences are also inconsistent with each other and none are widely enough accepted to lessen some of the friction, which slows adoption down even more. Every experience is so different; there are different apps to log into, different passwords to remember; some let you authenticate with your fingerprint, some don’t; some pay functionalities live in their own apps, some require you to access it from inside a larger app. There isn’t one single experience where a user can pay multiple ways at a single location.

“The [MCX] consortium became so myopic in its obsession with circumventing the card networks’ transactions fees that it entirely lost sight of how CurrentC would add value for consumers,” McKee said. “Its strategy began to further unravel as members such as Walmart strayed course and launched their own mobile wallets.”

With LevelUp, customers who have downloaded the app link their credit or debit card and scan a QR code at checkout to pay for their items. Their purchases at a single retailer are bundled into a monthly bill that the customer pays later, thereby lowering card fees for the retailer. The payments process has not always been smooth, mostly due to the technology hardware involved.

However, LevelUp also offers a rewards scheme through its retail partners. They vary from one place to another but they generally award you a discount in a dollar amount after spending a certain amount at a given place – you could unlock a $10 credit at a favorite coffee shop after spending $80 there, for example. They’re small rewards, not like racking up points to use when purchasing your next big vacation, but it’s the kind of incentive that other mobile wallets need to change consumer habits, which is ultimately what will allow mobile payments to take off.

If Chase offered the kind of incentives LevelUp offers within the network of MCX merchants, it could bring what’s been missing in mobile payments to a scale.

Now if only Chase’s next payments move would move away from the old QR code.

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Chase Pay lands deal with Shell, access to 20 million daily customers

Chase Pay and Shell partnership

What happens when the largest fuel retailer in the US does a deal with the largest credit card issuer? It means you’ll be able to use Chase Pay to buy your coconut water next time you fill up at Shell.

Chase recently announced it had signed a multi-year agreement with Shell to accept Chase Pay at stations across the U.S. Chase credit and debit cardholders can use Chase Pay, JPMorgan’s digital wallet product, to pay at the pump as well as inside convenience stores, online and within an app.

Competing in payments

Chase’s corporate parent, JPMorgan is one of the largest payments companies in the world across all forms of payment, including credit and debit cards, merchant payments, and wire transfers. The bank’s CEO, Jamie Dimon, has famously said that he expects to win in payments and adding distribution into Shell’s 20 million daily customers is a big step forward for Chase Pay.

Dimon has publicly commented that his firm’s investments in merchant payment technology, which include Chase Paymentech and ChaseNet, should pay off “handsomely”, while the outcome of Chase Pay, which includes P2P functionality, was less certain.

“But we think that the investment will be worth it and that it will help drive more merchants wanting to do business with us and more customers wanting to open checking accounts with us and use our credit cards, ” he wrote in his firm’s 2015 letter to shareholders.

Securing distribution via merchants

Building out Chase Pay requires a delicate seesawing between supply and demand. It’s a classic chicken-and-egg problem that marketplaces must contend with: consumers gravitate to payment tools if they’re accepted widely and merchants typically wait to see some traction from the payment provider before signing up. JPMorgan is inking broad distribution deals like this one with Shell and another with Starbucks to help Chase Pay adoption.

“We recognize consumers are looking to mobile solutions for everyday needs, including shopping, travel, restaurant reservations and more,” said Craig Schneider, Shell GM and Vice President of Retail Marketing North America. “Adding Chase Pay to the multiple payment methods Shell accepts will deliver a simplified, differentiated and personalized customer experience while driving loyalty.”

Distribution deals are necessary (but not sufficient) to help get users on new payment platforms. The lack of organic demand for new payment platforms has set off land grab, keeping business development professionals very busy over the next few years. On one side of the marketplace, broad technology firms, including Google, Apple and Samsung, and banks themselves, including Chase, Capital One, and soon Wells Fargo, are battling over distribution deals for their digital wallets. On the other side, large retailers like Walmart and Starbucks have launched their own loyalty and payments tools.

Using p2p to scale up

Another way for consumer payments technology to wage battle on marketplace dynamics is by propagating virally. To that end, Chase Pay can be used to pay other users, whether they bank at JPM or not. Using this new product, QuickPay, JPMorgan customers can send payments directly to one another and access them immediately from an ATM.

“Consumers expect immediate action in our real-time world,” said Barry Sommers, CEO of Consumer Banking at Chase. “That’s why we’re making this faster service available for our customers.”

The interbank hookups come via the clearXchange network, a consortium of 6 banks representing over 60% of the U.S. digital banking population. The group was acquired by Early Warning, a fraud protection and risk management company that shares critical data between 2300 financial institutions. Early Warning, itself, is owned in part by seven of the largest banks in the U.S. JPMorgan Chase joins firms like Wells Fargo and Capital One which, as part of the network, enable their customers to transact directly and immediately to their bank accounts.

Chase customers sent $20 billion in person-to- person transactions through Chase’s P2P tool, QuickPay last year. Chase Pay has a distinct advantage: its sheer size. Chase customers have more than 90 million consumer credit and debit card accounts, and nearly 24 million actively use the Chase Mobile app.

Add more A-list retailers and Jamie Dimon might very well get his winning way.

 

Photo credit: Blue Mountains Local Studies via Visualhunt.com / CC BY-SA