Magazine article American Banker

With Chase Pay, JPM Stakes Claim in Uncertain Mobile Future

Magazine article American Banker

With Chase Pay, JPM Stakes Claim in Uncertain Mobile Future

Article excerpt

Byline: Robert Barba

Mobile payments have not taken hold among average consumers, but as Eileen Serra sees it, Starbucks' model of tying rewards and mobile together is crucial to getting people to see their phones as extensions of their wallets.

"The reason to use mobile payments has to be more than hitting 'pay,'" said Serra, who is the chief executive of Chase Card Services at JPMorgan Chase. "Starbucks has been the most successful mobile payment model because they have integrated loyalty and rewards. That's how you drive adoption. You give [consumers] a reason to use it."

Her comments came in an interview late Monday, after JPMorgan announced its own play in the world of mobile wallets. The product, Chase Pay, is set to launch in mid-2016 and the company has partnered with Merchant Customer Exchange, which includes several major retailers including Walmart, Target and Best Buy, to tie loyalty and rewards programs to the mobile wallet.

Several days earlier JPMorgan said it would replace Square as the processor of nonmobile payments at Starbucks stores. First Data Corp. services mobile transactions for the coffee shop. JPMorgan joins a growing field of banks developing their own mobile wallets to make sure they remain relevant in a landscape that has several nonbanks, such as Apple, Android and Samsung, vying for pieces of the action.

With 94 million cards, 22 million active mobile banking users and its Chase Paymentech unit, JPMorgan is uniquely positioned to either be an innovator or suffer a serious fall should mobile payments take off the way industry players have long predicted. The move to create Chase Pay is a clear example of the company trying to protect its future.

"When you look at our capabilities, we have a huge number of debit cards, a huge number of credit cards, we have a wholly-owned acquirer - who better to drive the future of mobile payments than Chase?" Serra said.

Analysts who follow the company applauded the move, even though it is unclear what Chase Pay will mean for the company's bottom line.

"Why shouldn't JPM be a major contender in the digital wallet wars? The banks have the cards, they have the credit risk, and they have the legacy of creating the industry," said Mike Mayo, an analyst of CLSA, and one who is often critical of the company. "They are looking to benefit from existing leadership in the payments space where a handful of nonbanks have made inroads."

Still, Mayo said the news was not enough for him to revise earnings estimates, mostly because he does not know how to quantify the impact yet.

Betsy Graseck, an analyst at Morgan Stanley, said in a research note that it will take time for Chase Pay to show through in the company's earnings. …

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