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Why JP Morgan Is Struggling With Chase Pay
00:10:21
Despite spending $100 million on Chase Pay, JP Morgan is struggling to compete against other banks and tech companies who offer similar mobile payment programs. The Wall Street Journal's Emily Glazer explains why JP Morgan is having so much trouble.
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Wall Street Journal Announcer
this is yous Money Matters from the Wall Street Journal.
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Annemarie Fertoli
Welcome to youo Money Matters. I'm Annemarie Fertoli in New York. JP Morgan, the nation's largest bank, is struggling bring customers over to Chase Pay, its latest mobile payment project. Despite spending tens of millions of dollars on Chase Pay, JP Morgan is lagging behind other banks and tech companies. Here now to talk about why the bank is having so much trouble is Wall Street Journal reporter Emily Glaser joining us via Skype from Los Angeles. Emily, aren't all banks playing a little bit of catch up with mobile payment apps like Venmo and PayPal?
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Emily Glaser
Yes, definitely. This is an area that all banks including, including JP Morgan, but even other firms are having trouble with. The issue is that consumers, folks like you and me, are not completely tied to mobile payments yet. You know, stuff like Apple Pay has yet to really take off. And that's where something where the banks are putting out different products and services, they're trying to get out ahead of it, but the consumers aren't even ready for it yet.
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Annemarie Fertoli
I understand that younger people are signing on to mobile banking a little bit earlier, especially apps like PayPal and Venmo where they can transfer money. But, but what's holding other customers back? Is it a matter of the technology or of old habits, like going to an actual bank, for example, dying hard?
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Wall Street Journal Announcer
It's both.
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Emily Glaser
And there's actually a couple things at play here. So mobile banking means so many different things these days. There's peer to peer payments like what you were talking about, and that services like Venmo that's gotten really popular with millennials. Chase even has a service called Quick Pay that's been folded into this new network that a bunch of banks signed onto called Zelle. And so a lot of folks might be seeing Zelle, it's Z E L L E advertised on their banks these days. And that's the bank's attempt to compete with PayPal on peer to peer payments. For instance, if you are sharing a taxi with somebody or you go out to dinner or you owe someone money and it's a lot easier than getting out that $5.52 or whatever the amount might be. Then there's this whole other part of mobile banking and it's usually referring to mobile payments. And that's where things like Apple Pay, so Samsung Pay, Walmart Pay Chase Pay, it's all about mobile payments with a merchant. So in many cases that could be if I decide I need to buy something from a retailer, say, you know, West Elm, I'm getting furniture and I want to use my phone to pay for it instead of actually getting out a credit card or even cash in this situation these days, you can use Venmo to soon do that. And you've also been able to use Apple at a bunch of retailers as well. And these other services. That's where banks like Chase, even though they're trying to get ahead of it, have been falling behind.
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Annemarie Fertoli
Is it also a factor that J.P. morgan and other banks didn't begin in the online or digital space like some of the other apps we've been talking about?
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Emily Glaser
Well, banks have been online and on mobile for longer than we would probably imagine. I think part of it is that as consumers, we're always looking for the easiest way to do things. These days it might be the easiest app. In the past, it could have been the easiest website. You know, as technology changes, we adapt and oftentimes technology firms or smaller companies are just better at things like design and user research than other firms are. So for instance, it's no secret in the banking world that perhaps they have the plumbing down right? But as one of my sources had said to me, you know, banks are not known for designing the sinks. They're good at the plan plumbing. So the design factor, and that's sort of how we as users would use different applications and sort of flock to what's easy. That's something that the banks aren't as good at and something that tech firms are usually better at or even smaller startups that are really nimble and can move really fast and do, you know, make changes very easily. So, you know, banks have been putting a lot of money into technology for quite some time. In fact, JP Morgan has a budget of $9 billion for technology related expenses. And from our reporting, we believe they've spent around $100 million on Chase pay. Again, that's the one with mobile payments, with merchants. But it isn't working out right now. What the bank is saying is it'll help them either way. They're learning about the customer, they are trying to have these relationships with merchants. And even if it isn't sticking right now, it's not going to be all money lost because they'll learn through their process. The question that we're wondering is they've invested a whole lot of money and the merchants are not really signing on and the consumers aren't signing on. So what does it really mean for the bank?
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Annemarie Fertoli
I'm speaking with the Wall Street Journal's Emily Glaser about JP Morgan and why it's struggling to attract customers to making mobile payments. You're listening to your Money Matters from the Wall Street Journal. Welcome back, everybody. Emily, let's talk about competition from other banks. Some are doing better than others in attorney attracting their customers to mobile payments. Why is JP Morgan having such a hard time?
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Emily Glaser
So JP Morgan wanted to try to get into this mobile payment space in a way that was different than how others have tried to get into it. So, like I mentioned, they have competition from technology firms like Apple, Samsung, Google. They have competition even from retailers. Walmart, for instance, has its own app it's been rolling out called Walmart Pay. That's gaining a ton of traction. And it even has competition from other financial services firms, most notably PayPal, which is a huge player here, but even firms like Visa or MasterCard. So there's so many different players in this space. It's a very fractured market. And Chase thought that it could try to anchor its product. Chase Pay with the merchants. And those are oftentimes, you know, retailers like it could be Walmart, Starbucks is another one that they're working with. The issue here is that even though it offered what it thought was very good terms for the merchants, you know, that would make them want to sign on, it just has not been getting as many merchants as it thought it would. And it has not been reaching goals that it needed to. In fact, I even spoke with one of my sources who said there's this huge internal spreadsheet at the bank with all the different merchants listed. And it's very clear that they're having trouble capturing them. And that's sort of something that inside the bank is discussed as a problem because it has not been able to anchor what it needs to get this product more off the ground.
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Annemarie Fertoli
You found out that JP Morgan spent an estimated $100 million on its latest venture, Chase Pay. That's a lot of money, and it's still not working.
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Emily Glaser
It is a lot of money. You know, when you put it in perspective, and this is sort of funny to say, it's still a drop in the bucket for a bank like JPMorgan Chase. But we, when we heard of this number in our reporting, and it has not yet been reported, it's a lot. And that could be anything from developers, designers, business operations. You know, it's a whole bunch of different factors. You know, technology that Powers it that add up to the 100 million? So yes, it's a big question of they've invested a lot, why isn't it sticking? And I think it all goes back to that fact that it needs to merchants and that's what it was anchoring this product in. And if it doesn't have the merchant then it won't necessarily have the consumer to follow. And then on the other side of things, as we've talked about, the consumers aren't really doing as much of these mobile payments yet. So one of my sources described it to me as a chicken and an egg problem where you sort of need both to work to make it work overall. And Chase is struggling on both ends.
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Annemarie Fertoli
What does JPMorgan CEO Jamie Dimon have to say about Chase Pay? He spoke at an industry conference recently. Did he say anything about the success or lack thereof of Chase Pay?
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Emily Glaser
So this was really interesting. Jamie Dimon, he's the chairman and CEO of JPMorgan Chase. He spoke in September at an industry conference and someone, one of the analysts that was interviewing him asked him about Chase Pay and his response essentially was that the jury is still out. He basically said, look like we're, we're trying to sign on merchants. He, you know, he mentioned Starbucks, which was a pretty big win for JP Morgan. However, he said, you know, who knows what will happen? Like we're still trying. And what we thought was particularly interesting is that that was a little bit of a change in tune from when the head of retail at Chase, Gordon Smith, announced this product at a big industry conference two years ago roughly and was talking it up. And then to have Jamie Dimon roughly two years later say, you know, I'm not really sure it's a use case. That's literally a direct quote. We like to be there and we'll see how it pans out. He said we're obviously spending money on it. You know, he was just a little more iffy on everything. And I think that was very telling. To understand how it's viewed inside the bank right now.
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Annemarie Fertoli
Any indication of what's next for J.P. morgan? How is the bank going to keep pushing to get more people to start using Chase Pay?
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Emily Glaser
Well, listen, it's not like they're giving up on this product. I think right now they've really been reframing it as a longer term play and perhaps even longer term than we ever thought. At the bank's Investor Day back in February, it included Chase Pay as, as one of these significant investments and said that there were significant future benefits expected. And so this is definitely a product that the bank is still banking on, if you will. But it has a lot of offerings to whether it's the peer to peer payments, whether it's checking your balance on your phone, whether it's mobile check deposit. So this is one part of a very large mobile banking initiative. It's a really important one and it's one that the bank has invested a lot of money in and it doesn't sound like they're giving up yet, but we wanted to shed light on it because it is challenging for them and it's something that they are struggling with right now.
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Annemarie Fertoli
I've been speaking with the Wall Street Journal's Emily Glaser. She joins us via Skype from Los Angeles. Thanks so much, Emily.
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Emily Glaser
Thank you.
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Annemarie Fertoli
And thank you for listening to youo Money Matters. I'm Annemarie Fertoldi in New York.
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Wall Street Journal Announcer
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- [10:35]
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