As Americans Stick With Cards, JPMorgan Drops Its Chase Pay App
JPMorgan could compete with rivals such as Apple Inc. that are trying to transform how consumers pay for goods and services.
(Bloomberg) -- Will anything ever pry old-fashioned credit cards out of Americans’ hands?
Even as the rest of the world embraces the idea of paying for stuff with their smartphones, the U.S. is clinging to its cash and plastic -- so much so that even the nation’s biggest bank is struggling to persuade people to switch. Starting early next year, JPMorgan Chase & Co. customers will no longer be able to use the Chase Pay app to pay with their smartphones when shopping in stores, the bank said Wednesday.
It’s an about-face for a product introduced four years ago so JPMorgan could compete with rivals such as Apple Inc. that are trying to transform how consumers pay for goods and services. New technologies have spurred a revolution in mobile payments, with Chinese companies leading the way in helping consumers bypass credit and debit cards. The U.S. market has been slower to develop partly because merchants have been slow to accept such payments and consumers haven’t found new options convenient enough to give up paying with cards that offer lucrative rewards.
“All new payment types start with merchant acceptance and they weren’t getting that,” said Richard Crone, chief executive officer of payments consultancy Crone Consulting LLC. “They’re not giving up on mobile payments, they’re giving up on the physical point of sale.”
JPMorgan customers still will be able to use Chase Pay on the websites and apps of retailers that accept it. With a renewed focus on enticing retailers to offer its digital wallet on their websites and in their mobile apps, JPMorgan is joining the ranks of banks and technology giants seeking to capture a larger share of e-commerce spending in the U.S.
“When we started this, it was four years ago -- the payment space has changed a lot over the period of time and customer behavior has changed,” Eric Connolly, head of Chase Pay, said in an interview. “A lot of merchants have shifted to ‘buy online, pick up in store’ and have invested in their online presence and their apps.”
Online shopping has surged in recent years, but consumers still abandon their cart before finishing a purchase roughly 70% of the time, according to the Baymard Institute, an e-commerce researcher. About 26% of adults in one study cited a “too long, complicated checkout process” as their reason for failing to complete their purchases.
That’s where companies such as Apple, Google and Amazon.com come in. Their digital wallets offer an easier way to check out, with payment credentials loaded up and ready to go when customers click “buy.”
China’s Impact
In China, use of mobile wallets on smartphones has surpassed payments with credit and debit cards both online and in person, with the method accounting for 46% of the $2.5 trillion spent at physical and e-commerce stores last year. In the U.S., digital-wallet transactions represent only 5% of the $2.6 trillion market for in-person purchases and 20% online, while cards accounted for 80% of spending at physical stores and 70% online.
JPMorgan wants to capture a larger share of the market for digital shopping in the U.S., where spending is projected to reach $1.1 trillion by 2022. Online, banks and tech companies have had an easier time convincing people to use mobile wallets, pitching them as a more convenient method than inputting card details at checkout.
It’s a market long dominated by PayPal Holdings Inc., whose digital wallet was accepted by about 70% of online merchants at the end of the second quarter. Fewer than 1% accepted JPMorgan’s, according to a study by industry publication PYMNTS.com.
Pablo Rodriguez, a JPMorgan spokesman, declined to say how many online retailers currently accept Chase Pay, adding that the bank expects that number to increase. In a statement on Wednesday, the company said that GrubHub Inc. will soon accept it.
JPMorgan shares, which have climbed 10% this year, advanced 0.3% to $107.68 at 2:41 p.m. in New York.
Visa, Apple
The bank’s push to encourage more retailers to accept its checkout button on their websites and mobile apps is likely to face resistance given how little traction it gained in the past four years. In addition, Visa Inc. and Mastercard Inc. are in the process of developing their own unified digital wallet to improve the online checkout process after the two payment networks announced last year they would end their individual efforts.
Read more: Shiny new button may help Visa, Mastercard and AmEx fight PayPal
With JPMorgan throwing in the towel on in-store mobile payments, the bank is giving Apple more room to run with its Apple Pay application. While the tech giant’s efforts have gotten off to a slow start in the U.S. since Apple Pay’s 2014 debut, Apple recently unveiled a new credit card with Goldman Sachs Group Inc. that’s meant to spur greater use of the digital wallet.
To contact the reporters on this story: Michelle F. Davis in New York at mdavis194@bloomberg.net;Jenny Surane in New York at jsurane4@bloomberg.net
To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, Daniel Taub, Steve Dickson
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