Bank has already signed a deal with a group of major retailers including Wal-Mart, the largest US retailer, and Best Buy
JP Morgan Chase is to launch its own competitor to Apple Pay that will allow consumers to pay retailers using their smartphones in stores.
The largest US bank, which has already won the endorsement of a major group of merchants, is the latest company to try to profit from the prevalence of smartphones, which many financial executives believe will one day be consumers’ preferred way to pay for everything from milk and eggs at the supermarket to a rental car at an airport.
The companies that figure out how to convince consumers to stop pulling credit cards out of their wallets and start paying with their phones stand to earn vast sums by taking a percentage of the trillions of dollars that consumers spend annually.
No clear front-runner has emerged in the business yet. JP Morgan believes its smartphone application, known as Chase Pay, has one key advantage: the caliber of retailers it has brought on board, Gordon Smith, chief executive of the bank’s consumer business, said.
JP Morgan has signed a deal with the Merchant Customer Exchange, a group of major retailers including Wal-Mart, the largest US retailer, and Best Buy to accept payments through the bank’s technology.
Retailers included in the Merchant Customer Exchange ring up more than $1 trillion of sales per year and have more than 100,000 outlets.
Rivals like Apply Pay have struggled to sign up retailers to accept their payments. In June, Reuters interviewed the top 100 US retailers and found that two-thirds said they did not plan to accept Apple Pay this year.
The Apple Pay website lists Best Buy in its “Coming Soon” section but has no mention of Wal-Mart.
JP Morgan signed up the Merchant Customer Exchange mainly by promising to cut retailers’ costs, Mr Smith said. Whenever a consumer pays for something with a credit card, the retailer pays fees to banks and credit card networks to process the transaction.
JP Morgan is willing to accept a lower fee for Chase Pay transactions than for other transactions, and hopes to make up the difference by getting more volume over its network, Mr Smith said.
“As merchants give us more business, we will give them better pricing,” Mr Smith said. JP Morgan declined to comment on how much it would cut fees.
JP Morgan expects to market its product heavily in the middle of next year.
Chase Pay is also promising superior security, a critical selling point after retailers including Target and Home Depot were hit by hackers, Mr Smith said. Longer-term, JP Morgan also hopes merchants will offer more discounts through Chase Pay, encouraging consumers to use the technology more.
Chase Pay will initially work for consumers that already have Chase credit, debit and prepaid cards, Mr Smith said. There are about 94m of those cards outstanding now in the US, and the bank has more spending on them than any other issuer. The app will work on Apple and Android-based phones.
JP Morgan’s consumer bank has already factored the system’s near-term launch costs into its expense estimates, and expects the benefits to come over the medium to long term.
The bank will continue working with Apple Pay and other services even as it builds a rival, Mr Smith said.
Chase Pay is just one of a series of companies trying to become the go-to payment technologies, including Apple Pay, Samsung Pay and Alphabet’s Android Pay.