Why Chase Pay never needed the point of sale

By dumping Chase Pay's standalone point of sale app, JPMorgan Chase is handing a victory to the likes of Apple Pay — but it's also eliminating an app that was tangential to the issuer's long-term payments goals.

Chase Pay is the public face of ChaseNet, a closed-loop system that cut fees by eliminating third parties from processing when both the consumer and the merchant are Chase customers. The Chase Pay app is a single use case that served more to demonstrate ChaseNet's capabilities than to secure the platform's success.

Chase Pay will still exist in apps such as GrubHub and LevelUp (of which Chase is an investor), and these apps have wide enough audiences that they can still function as showcases for the underlying ChaseNet system.

"I don’t think that they’re ceding ground, because I don’t think you can cede ground that you don’t have," said Thad Peterson, a senior analyst at Aite. "Chase Pay has struggled to gain traction since its inception; the value proposition wasn’t strong enough to clearly differentiate the product from the ‘Pays.' The message is clear, a mobile wallet has to present a clear advantage over other payment alternatives, and this is especially true with the launch of contactless in the U.S."

Chase will close its standalone Chase Pay App for iOS and Android in early 2020 to focus on boosting Chase Pay's presence in more merchant apps.

The issuer has long seen the value of urging its customers to enroll with mobile wallets in addition to — or instead of — its own. For example, a rotating reward category for its Chase Freedom card in 2017 provided equal incentives for using Chase Pay, Apple Pay, Android Pay (now Google Pay) or Samsung Pay.

"We’ll continue to support Apple, Samsung and Google payment apps for customers to continue to use their Chase cards. And we'll continue to work closely with Apple, Samsung and Google to make it even easier for our customers to use their Chase cards with those wallets," Eric Connolly, head of Chase Pay, said in an email sent through Chase's PR department.

The bank sees its biggest opportunity in working with merchants to provide easy payment solutions for customers through the Chase Pay button online and directly in merchant apps, Connolly said.

"Some of the Chase Pay features are already available in the Chase app and others may either move to Chase app, or sit within merchant apps," Connolly said, adding the change is intended to focus the bank's efforts on where it sees consumer behavior trending and merchants investing.

The landscape for mobile payment changed abruptly this week with the formal launch of the Apple Card. Now that Apple has its own payment card that it markets as the go-to card for Apple Pay, it's more important for banks to compete to be the default card in Apple Pay and other mobile wallets.

The launch of Apple Card, the VC-fueled expansion of autonomous checkout and the card networks' universal "buy" button for online payments point to a future in which the lines between e-commerce purchases from a website and payments at a store aren't as distinct.

Chase Pay has gained traction as an in-app option and is playing to that strength as Apple Card accelerates. Chase reports it has 51 million "digitally active" consumers, who are currently using Chase Pay at Starbucks, Shell, United Airlines and Atom Tickets. Chase Pay also links to PayPal accounts.

"Apple has lowered the bar for instant issuance of a new credit account," said Richard Crone, a payments consultant. "What investors and stakeholders want to know is, can Chase do all of this inside their own mobile banking app?"

Chase has made several moves over the past few years to build its e-commerce network. It made $10 million investment in LevelUp at the end of 2016 to expand LevelUp's footprint and enhance Chase's mobile payment and loyalty heft against Apple Pay. Chase later in 2017 acquired WePay, providing an API connection for small businesses to accept payments. WePay also handles the merchant onboarding for Chase's partnership with BigCommerce to build a merchant network for Chase Pay's one-click "buy button," which launched in 2018.

BigCommerce manages shipping and payments for a network of small and midsize retailers, as well as Amazon, eBay and Facebook Marketplace listings. BigCommerce has served as a gateway for other major payment companies, such as Amazon Pay, and a collaboration with Square to support e-commerce payments for Square's merchants.

Chase has attempted to build an in-store mobile payment audience for Chase Pay, such as a holiday showcase at the World Trade Center and tying its mobile wallet to the now-defunct Merchant Customer Exchange, a network of retailers that tried to use their scale to compete with card fees. Chase purchased the remains of the failed MCX wallet in 2017 to boost Chase Pay.

Chase in 2018 partnered with Samsung Pay to address a gap with merchants that did not add a QR code reader to their checkout. Samsung Pay emulates NFC payments for merchants that are not NFC enabled.

As the card network-backed standardized buy button develops and merchants increasingly adopt autonomous checkout to tie in-store checkout directly to e-commerce accounts, the importance of checkout hardware will fade.

"[Chase] does have an upside. With autonomous checkout coming, all payments will be in the cloud," Crone said. "It won't be 'card not present' but 'person present.' "