JPMorgan Chase & Co said on Monday it will soon launch its own competitor to Apple Pay that will allow consumers to pay retailers using their smartphones in stores, and it has already won the endorsement of a major group of merchants.
The largest U.S. bank is the latest company to try to profit from the prevalence of smartphones, which many financial executives believe will one day be consumers' preferred way to pay for everything from milk and eggs at the supermarket to a rental car at an airport.
The companies that figure out how to convince consumers to stop pulling credit cards out of their wallets and start paying with their phones stand to earn vast sums by taking a percentage of the trillions of dollars that consumers spend annually.
No clear front-runner has emerged in the business yet. Chase believes its smart phone application, known as Chase Pay, has one key advantage: the caliber of retailers it has brought on board, Gordon Smith, chief executive of the bank's consumer business, told Reuters.
Chase has signed a deal with the Merchant Customer Exchange, a group of major retailers including Wal-Mart Stores Inc, the largest U.S. retailer, and Best Buy Co Inc to accept payments through the bank's technology.
Retailers included in the Merchant Customer Exchange ring up more than $1 trillion of sales per year and have over 100,000 outlets.
Rivals like Apply Pay have struggled to sign up retailers to accept their payments. In June, Reuters interviewed the top 100 U.S. retailers and found that two-thirds said they did not plan to accept Apple Pay this year.
Apple Inc's Apple Pay's website lists Best Buy in its "Coming Soon" section but has no mention of Wal-Mart
Apple Inc's Apple Pay's website lists Best Buy in its "Coming Soon" section but has no mention of Wal-Mart
Chase
signed up the Merchant Customer Exchange mainly by promising to cut retailers'
costs, Smith said. Whenever a consumer pays for something with plastic, the
retailer pays fees to banks and credit card networks to process the transaction.
Chase is willing to accept a
lower fee for Chase Pay transactions than for other transactions, and hopes to
make up the difference by getting more volume over its network, Smith said.
"As
merchants give us more business, we will give them better pricing," Smith
said in an interview. Chase declined to comment on how much it would cut fees.
Chase
expects to market its product heavily in the middle of next year. Smith is
speaking to retailers about Chase Pay at a conference about payments on Monday
in Las Vegas.
Chase Pay is also promising superior security, a
critical selling point after retailers including Target Corp and Home Depot Inc
suffered from hacking attacks, Smith said. Longer term, Chase also hopes
merchants will offer more discounts through Chase Pay, encouraging consumers to
use the technology more.
Chase Pay will initially work for consumers that already have
Chase credit, debit, and prepaid cards, Smith told Reuters in an interview.
There are about 94 million of those cards outstanding now in the United States,
and the bank has more spending on them than any other issuer. The app will work
on Apple and Android-based phones.
JPMorgan
Chase's consumer bank has already factored the system's near-term launch costs
into its expense estimates, and expects the benefits to come over the medium to
long term.
The
bank will continue working with Apple Pay and other services even as it builds
a rival, Smith said.
Chase
Pay is just one of a series of companies trying to become the go-to payment
technologies, including Apple Pay, Samsung Electronics Co Ltd's Samsung Pay,
and Alphabet Inc's Android Pay.
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