When JPMorgan Chase & Co. announced its own mobile wallet, Chase Pay, in October, it said the new payments service would begin rolling out by the middle of this year, and on Tuesday the money-center bank announced an important step in that direction. The fledgling service, which is up against an array of formidable rivals, including Apple Inc.’s Apple Pay and Alphabet Inc.’s Android Pay, has signed its first major merchant, Starbucks Coffee Co.
By the end of the year, Chase Pay will be accepted at 7,500 company-operated Starbucks stores in the United States, Gordon Smith, chief executive for consumer and community banking at Chase, said during a presentation to investors. Chase Pay will also be embedded in the well-known Starbucks mobile app to be used to reload Starbucks’s prepaid card.
Starbucks, which is a client of Chase’s unique ChaseNet merchant network, offers Chase Pay several potent advantages that the bank expects will accelerate adoption for the mobile wallet. Among these are the high frequency with which Starbucks’s customers visit the chain’s stores and use its app, Smith said. Starbucks’s own mobile app is extremely popular, accounting for more than one-fifth of all transactions in the final quarter of last year. ChaseNet is a 3-year-old, closed-loop system in which Chase licenses a portion of Visa Inc.’s VisaNet software to process its own Visa transactions at network members’ stores.
Chase Pay relies on barcode scanning to link consumers’ phones to the point of sale, the same system Starbucks uses for its own mobile app.
Speaking more broadly, Smith said Chase Pay’s reception among merchants is climbing rapidly. “The feedback we’ve had from merchants has been terrific,” he said during the investor presentation. “The requests for meetings from merchants have been terrific.” He attributed this interest to what he called the wallet’s “relatively simple” value proposition, which he said includes better fraud protection, lower acceptance cost, and a simple checkout for consumers.
Chase has not publicly revealed merchant pricing for Chase Pay. At the launch in October, Smith said Chase Pay would levy a single, fixed fee to merchants and would eschew card-network interchange and processing fees, without specifying the fee. He added the fee would decline as a merchant adds volume. Chase has not directly explained how Chase Pay will process transactions without network fees, but Chase Pay transactions will be handled by the closed-loop ChaseNet network. In October, Chase Commerce Solutions, the unit that houses ChaseNet, replaced Square Inc. as Starbucks’s acquirer.
Chase Pay also will be part of the CurrentC wallet offered by the merchant-controlled Merchant Customer Exchange LLC consortium. This wallet is now undergoing a consumer test in Columbus. Ohio, with plans for expansion perhaps later this year.
MCX is controlled by 40 big-box retailers, airlines, and grocery chains representing 70 consumer brands. But Wal-Mart Stores Inc., long an MCX stalwart, announced in December it would launch its own wallet, Walmart Pay, this year, and Target Stores Corp ., another MCX member, is rumored to be preparing a proprietary offering.