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Will Chase dethrone Apple with bank-branded mobile payment adoption?

Chase’s dedication to competing with current mobile payments developers, such as Apple and Samsung, could potentially offer it front-runner status as its substantial customer base strays away from the pigeonhole caused by software developers.

The bank is the first to develop a mobile payment platform, named Chase Pay, and is likely to hold its own against big names in the field as its customers use a varied range of devices, opening it up for a wider audience. Chase is one of the larger banks, and all its customers with a smartphone are automatically eligible.

“The greatest advantage for a bank, like Chase, to introduce mobile payments is that they are not tied to a given smartphone manufacturer like Apple, Android and Google,” said Ryan Grogman, vice president at Boston Retail Partners. “Another benefit for large banks entering the mobile payment space is the large volume of customers that will automatically be signed-up for the service.

“It is estimated that one if every two households in the U.S. is a Chase customer,” he said. “Chase Pay is also backed by the Merchant Customer Exchange Consortium so they are going to have the support of over 100,000 retail locations at launch.

“With over 94 million card accounts, Chase is certainly in a position to leverage their current market share to help gain traction in the fast-growing mobile payment space. Many tech-savvy Chase customers already use their smartphone for Chase banking, and adding the ability to execute a payment transaction with these phones is a logical and smart move by Chase, combined with the backing of the MCX merchants, it will have a leg up on other banks looking to implement their own mobile payment solutions.”

Chasing mobile users
Chase will be rolling out a payments system to its all its mobile customers, which could boast a seamless transition for users and can bring mobile payments into complete mainstream with its convenience.

The service will launch in 2016 and use the older barcode technology rather than an NFC approach, which means that users will have to scan their phones at checkout rather than simply touching it to the reader. While the process adds an extra step, it also it keeps up its possibility of a larger audience as any retail location with 2d scanning ability will be able to accept Chase Pay as well as users of both Apple and Android devices will be able to use it.

Mobile users of Chase Pay will be able to receive reward points on their Chase credits cards through the payment service as well.

As mobile continues to secure its place as a staple within the banking industry, Citibank just announced the introduction of a cash machine which eliminates the need for credit cards to dispense funds. Mobile users can schedule a withdrawal with the Citi app and once they approach the machine, it will register the device and dispense cash.

Mobile payment turbulence
While Chase’s mobile payments’ main competitor Apple Pay’s adoption rate so far is encouraging, the solution faces resistance in many countries, is viewed as a threat by some banks and still needs to prove its value for merchants, according to a new report from Forrester (see more).

Also, while the EMV deadline came in the beginning of October, many retailers are not ready, suggesting that NFC payments solutions Apple Pay and Android Pay will continue to face more limited acceptance compared to Samsung Pay, which leverages older magnetic stripe technology (see more).

The upheaval within the mobile payments sector may mean that Chase’s barcode strategy to be smart.

“Using QR barcodes for executing the payment comes with some inherent advantages and disadvantages,” Mr. Grogman said. “On the positive side, QR barcode technology can be supported by virtually any merchant that supports 2D barcode scanning and it does not require the latest generation of payment terminals which are necessary for the support of NFC-based payment solutions.

“However, the use of QR codes will present integration challenges for those merchants who are not members of the MCX Consortium supporting the CurrentC platform,” he said. “From a usability perspective, consumers will need to unlock their phones and launch an app, either the MCX CurrentC app or the Chase Pay app, to generate the code during the checkout, which is a more complicated process than simply holding your phone near a payment terminal for executing an NFC-based mobile payment app transaction.

“Consumers may debate whether these steps will be worth the effort vs. simply taking a card out of their wallets and swiping or inserting to make a payment.”

Final take
Brielle Jaekel is editorial assistant at Mobile Commerce Daily