Chase is diving into mobile payments in another way – offering a different model that challenges the incumbents. But, will it work? The Chase model differs greatly from the newly crowned incumbents Apple Pay and Android Pay in technology, customer experience, acceptance, and economics. Let’s look at each.
Technology
Chase Pay works across any major mobile platform (iOS, Android, etc.), which is greatly welcome. It is not controlled by OS developers, but, instead, the Issuer (or is it?). Instead of using NFC, it generates a QR code (3D bar code) that the cashier scans. Again, depending on how you look at this, it is better short-term since merchants aren’t dependent on having a NFC reader – though that may come at the cost of security.
Customer Experience
Because of the QR code dependency, the customer experience is definitely different. It relies on handing over your phone and waiting for the cashier to properly scan the code. Maybe your experience is different than mine, but I’d wager that the scan works maybe half of the time. Screen protectors and cases often occlude the screen such that the standard scanners can’t pick up the code. I wouldn’t feel too confident if I was using this without my traditional wallet as a back up. Also, it means that the transaction will take longer.
Acceptance
Now we start realizing why Chase is going down this path. Chase Pay will be accepted at MCX merchants (Walmart, Target, etc.), and likely offered to all of Chase Merchant Services merchants. To me, this is where it gets interesting. Chase is the number one “wholly-owned” merchant acquirer. In 2016 (!), the number of locations will surpass 100,000. Not bad acceptance.
Economics
Since this is closed loop, operating under the MCX rules, the economics are wildly different than typical credit transactions. The economics become much more merchant friendly (at the expense of the Issuer, which, obviously, Chase is, as well).
So there it is – the reason behind this new venture. This is a play for Chase Merchant Services offering an alternative acceptance model for its merchants. They are willing to concede the Issuer Interchange revenue in order to makes gains on the merchant acquiring front. This could be in order to win business from the big guys (Walmart, etc.), or just placate the merchant community. My question is, how committed are they to make this work? How much are they willing to forgo? Are they willing to extricate themselves from Apple Pay or Android Pay (well, not yet, obviously)? Are they willing to invest to keep this model competitive?
Only time will tell. But at least we have another model that at least tries to change the economics. The question is whether the user experience is sufficient to make the consumers use it. Equally, the merchants would need to limit use of the other forms of mobile acceptance (Target and Walmart currently do not accept Apple Pay, but that might be changing).
Prediction? Chase Pay, as constituted, is gone by 2017.
