In explaining JPMorgan Chase's commitment to the Chase Pay mobile wallet, Gordon Smith told investors in February that the mobile payment landscape was going to get more complicated before it gets simpler.
Smith, Chase's CEO of consumer and community banking, added a big "but" to that equation in saying, "But it will become simpler." In other words, when the smoke clears, Chase Pay hopes to be the "simpler" option still standing, and it has given itself several ways to play the long game that’s necessary to compete for mobile payments dominance.
Smith’s declaration to investors harkens back to an industry view from the early days of the mobile wallet wars: "One of these technologies will win out, but no one knows what it is."
That feeling was prevalent three years ago when Google Wallet laid an egg during its first couple of years, struggling to get bank, merchant and consumer adoption. It was reinforced even more when the Isis Mobile Wallet, which changed its brand to Softcard to avoid connection with the Islamic State terror group, came apart at the seams. The result of that demise--Google’s purchase of Softcard assets--fueled the rise of a new entrant in Android Pay.
Apple Pay’s very public launch in 2014 started a chain reaction of new wallets and changed the common belief that one company would "win" the mobile wallet wars to a view that that numerous third-party providers would have wallets, as well as many banks launching their branded models.
Instead of a winner-take-all battle, the theory became: Consumers would pick a mobile wallet similar to how they choose a bank, a computer or a car. They'd pick the one that fits their needs, or a brand they simply know and trust more. And wallet providers would be there to oblige with different models with different features to pick from.
But let's say Smith, who has had plenty of experience in the digital payments space at both American Express and now Chase, has a clearer vision of this. After all, he's making the case that Chase wouldn't be tossing so much money behind Chase Pay if it thought the wallet would just be "another option" out there. Nope, Chase wants Chase Pay to be a dominant player, one that can bring immediate scale to merchants, and the promise of an easy-to-use wallet for its customers.
A quick glance at what the mobile wallet playing field looks like with its key players suggests that any type of adjustment period, in which players would fall by the wayside, is going to take a long time. And some recent numbers suggest that a falling out might not happen at all.
Juniper Research this week predicted 148 million consumers worldwide will make mobile payments with their handsets using Near Field Communication this year. Of those, 70% will be Apple Pay or Samsung Pay users, Juniper said. It also claims Apple Pay registration hit 38 million within its first day available in China last month.
Chase certainly doesn't expect things to get less complicated soon, but numbers like that say consumers are migrating toward contactless payments with their phones. Whether that makes things more complex or simpler is left to interpretation.
The providers currently making headlines in the game are not of the startup variety or companies that have all of their financial eggs solely in the mobile wallet basket. Rather, the wallet is almost a hobby technology at this point, one that can develop over time as consumers adopt. These companies have many other profitable irons in their fires.
Plus, a clear-cut "go to" technology is not in place. For the purpose of this discussion, let's call the key seven wallet players Apple Pay, Android Pay, Samsung Pay, PayPal, Chase Pay, CurrentC [the yet-to-debut Merchant Customer Exchange wallet] and Capital One.
In looking at those wallets, a jury in the courtroom of mobile payments would vote 4-3 in favor of NFC for contactless payments over QR code technology. Apple Pay, Android Pay, Samsung Pay and Capital One use NFC, while PayPal, Chase Pay and CurrentC use QR code. That could change soon, with PayPal's recent deal with Vodafone providing an indication it is ready to embrace NFC. Of those wallets, only Android Pay deploys Host Card Emulation to bypass the secure element on the phone, while Apple Pay and Samsung Pay rely on the secure element to store card credentials.
It all points to longevity in the mobile wallet wars. There are no common standards. If anything comes close, it would be in-app payment capabilities. They all have it, except CurrentC, which technically is an in-store payment method that would let retailer branded apps, and Chase Pay for that matter, ride along side.
Merchant acceptance is another factor that points to a lengthy feeling out period, with each making various claims, all of which, quite frankly, are hard to confirm. In general, when they say "merchant locations," they actually mean terminals. Apple, Android and Capital One say they are in the 200,000 merchant location range, Samsung touts it can operate at 80% of physical merchant locations, while PayPal is in some stores but clearly has millions of online merchant clients. Chase Pay is growing with MCX and Starbucks even before it is available to its customers, while CurrentC has all of the MCX members in its corner.
PayPal, Chase Pay and CurrentC work on all operating platforms, while Apple has its iOS network, and Android, Samsung and Capital One use the Android platform. All offer either proprietary encryption or card-supported tokenization.
Anyway you view it, the market is a mixed bag that can frustrate banks, merchants and consumers alike. It's not a setup that suggests a clear winner can emerge.
For its part, Chase certainly sits in a nice position, regardless of how Smith's prediction of more-complexity-before-less unfolds. Chase can move to the forefront with its own customers with Chase Pay, or stay behind the scenes as part of another app like Starbucks, or operate as the processor under the hood of a wallet through Chase Paymentech. That's the kind of simplicity Chase is envisioning.
David Heun is an associate editor at PaymentsSource.