JPMorgan Chase says ChaseNet Rollout Is Exceeding Expectations

By Jim Daly

JPMorgan Chase & Co. reported Tuesday that 60,000 merchants use its in-house ChaseNet merchant-processing venture and as of January they were generating annualized charge volume of $16 billion. Merchants in the venture include United Airlines, the Marriott hotel chain, DirecTV, 1-800 Flowers, Groupon, Zillow, and Barnes & Noble in addition to merchant processor Square Inc., which feeds its transactions to JPMorgan’s Chase Paymentech merchant-acquiring subsidiary.

“ChaseNet rollout has exceeded our initial expectations and has enabled our continued market-share gains,” says a JPMorgan Chase slide presentation. The giant banking company made the presentation for its annual Investor Day conference Tuesday in New York.

Announced two years ago, ChaseNet is JPMorgan Chase’s novel attempt to reduce payment-network processing costs and offer merchants more value-added services by creating a hybrid closed-loop network. Originally dubbed Chase Merchant Services, the new venture licenses a portion of Visa Inc.’s VisaNet network to process Visa credit and debit card transactions from Chase’s tens of millions of cardholders when they make purchases at merchant locations served by Chase Paymentech, one of the nation’s top acquirers. ChaseNet is headed by Mike Passilla, the former boss of U.S. Bancorp’s Elavon acquiring subsidiary.

According to the slide deck, ChaseNet has streamlined rules, such as no signature required on transactions of less than $1,000, and a simplified pricing structure, and it can give merchants what it calls an “end-to-end customer view.” Chase did not disclose charge volumes, but said monthly volumes in December and January were more than double those from last July through September, when the ChaseNet pilot program was just starting.

Including Chase Paymentech, ChaseNet, and ChaseOffers, JPMorgan Chase posted $848 billion in merchant-processing charge volume last year, up 81% from $469 billion in 2010.

In other payments news, JPMorgan Chase said it had issued more than 14 million EMV chip cards as of January. “We forecast that [about] 90% of card-present spend will be on a chip credit card by October 2015,” the presentation says. Oct. 1 is the date of the bank card networks’ so-called U.S. liability shift, when liability for counterfeit and lost-and-stolen card fraud falls to party in a transaction, issuer or acquirer, that doesn’t support EMV.

Regarding mobile banking and payments, JP Morgan Chase said its mobile app had 19 million users in 2014. Customers have enrolled more than 1 million Chase cards for Apple Inc.'s Apple Pay service. Customers also made more than 60 million bill payments using the mobile app last year, up 30% from 2013, and 45 million mobile deposits, up 25%. Person-to-person mobile payments using the Chase QuickPay service totaled 30 million transactions, up 80%.

Meanwhile, the company said the proprietary platform for its Chase Pay digital wallet “has enjoyed a successful pilot,” with a broader launch planned for later this year. A Chase banking customer uses her same online-banking credentials to use the service. The presentation says more than 50 million Chase customers potentially could use the service, which employs tokenization to protect cardholder data.

JPMorgan Chase also said its customers continue to adopt Apple Inc.’s Apple Pay mobile-payments service. The presentation didn’t give figures, but said the number of Chase credit and debit cards registered for Apple Pay transactions is about twice the number registered in late October, just after Apple Pay’s launch.

Chase payments executives were not available for comment.