Cut to Chase
JPMorgan’s new smartphone wallet presents a clear challenge to the burgeoning rival service from Apple. The mega-bank is taking on more than just the $680 billion tech behemoth, though. Unveiled with much fanfare by JPMorgan retail banking boss Gordon Smith at a financial technology conference in Las Vegas on Monday, Chase Pay has the potential to shake up the ever more convoluted way payment systems work.
Chase Pay, due in mid-2016, proposes to make the process simpler for both customers and retailers. Rather than being just one link in the payments chain, Chase will handle or run pretty much everything. That should mean the all-in cost per transaction falls. It’s even going to pre-load each customer’s most-used credit or debit card into the system. That doesn’t just eliminate an annoyance factor, but also removes what became a security weak spot for Apple Pay: thieves loading stolen cards.
The payment pipes owned by MasterCard and Visa will keep routing transactions. Even that relationship, however, may be altered. Chase – aligning itself with the fledgling Merchant Customer Exchange, an early Apple Pay rival led by a group of retailers including Wal-Mart Stores – is going to charge merchants a flat fee for using Chase Pay, thus getting rid of the variable network and processing fees.
Chances are that JPMorgan will cover those, perhaps in anticipation of extra volume bridging the gap between what it collects and what it pays to Visa and MasterCard. The bank run by Jamie Dimon is also absolving store owners of any liability for fraud. And it lets them build their own loyalty and rewards programs into Chase Pay, making life that little bit simpler for buyers while increasing their own ability to increase revenue.
Consumers, meanwhile, will get a way to buy goods and services that works in stores, on mobile phones and on computers, and is potentially devoid of aggravation. All in, that makes the JPMorgan option less an Apple Pay killer than a major threat to rival banks and the likes of card issuers such as American Express. It’s one of the first clear signs that the growing war over financial technology involves battles on many fronts.