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.