Financial Times revealed the internal dynamics at JPMorgan Chase - around its pay-by-bank project.
Interesting to see fast payment and credit cards, two topics I’ve been following, begin to intersect at the largest US bank.
Here is some background info to help you digest this FT piece.
🟦 INCUMBENT BANKS
In the rearview mirror, banks realized they had left too much room after the 2008 Great Financial Crisis - which partly contributed to the growth of fintechs since.
Recognizing the power of technology and changing consumer behaviors, banks do not want to make the same mistake.
“Dimon has said JPMorgan should have built its own mobile payments platform for merchants before Square.”
Now Chase sees pay-by-bank as an opportunity it cannot afford to overlook.
🟦 FAST PAYMENT
The Clearing House (TCH) launched Right Time Payment (RTP) in 2017. The use cases for retail payment are still few. Smaller FIs are hesitant to join RTP as TCH is owned by large banks.
For the resilience of the important payment infrastructure, the Fed announced its own solution FedNow in 2020. It is currently in pilot and scheduled to launch next summer.
The availability of two fast payment networks is expected to stimulate more production innovation and competition, which are key to final user adoption.
The development of pay-by-bank at Chase is an example of what is to come.
🟦 CREDIT CARD
Does Chase’s move mean the credit card is going to die?
Don’t call it so fast.
Recognizing threats, credit card networks are working hard to stay relevant.
When the controversial Libra global coin was announced by Facebook in 2019, Visa and MasterCard were both the founding members (they quickly backed out with the regulatory signal).
If there is another payment rail, card companies wanted to make sure they are part of it.
From BNPL and fintech, to open banking and crypto, credit card networks working hard with partnerships, acquisitions, and new product launches.
That is what Chase is doing - putting down an insurance bet - in case the $5 billion credit card business is being chipped away.
The piece from Joshua Franklin at Financial Times:
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