Inside Chase Merchant Services

I had the chance to visit with Mike Passilla recently to get the scoop on the Chase Merchant Services (CMS) Group he leads at Chase and the value it delivers to consumers and merchants. I’ve written before that my view on CMS is that it has all of the essential ingredients for creating the next three-party system in payments. Its deal with Visa gives it a direct connection to merchants via a network now branded as ChaseNet, its ownership of Paymentech gives it the ability to process payments and onboard merchants, and its access to Chase cardholders gives it a customer base that is highly attractive to merchants.

Mike painted the picture for how all of these assets, plus one more organized around its digital-offers business, will empower both merchants and consumers and, in the process, simplify the payments environment and expand opportunities for commerce.

Here’s how our conversation unfolded. …

WEBSTER: Mike, you’ve been on the ground in Dallas now at Chase Merchant Services since the late summer of 2013. What’s been keeping you busy these last 10 months?

PASSILLA: I’m having fun laying the foundation for bringing new and powerful payments and commerce services to our clients. We have a great team, and our vision is clear: to give merchants a voice in the payments process that will simplify their business operations, reduce fraud costs, drive sales and deliver an even better customer experience to Chase cardholders who shop at these merchants.

Over the past year, we’ve been hard at work at this. We’ve integrated and aligned three separate businesses to create Chase Merchant Services: our global payment processing and merchant acquiring division known as Paymentech, our new payment platform known as ChaseNet, and finally our digital-offers business.

Chase’s merchant-services business is one of the most well-respected, reliable and fastest-growing acquiring companies in the industry, with almost $800 billion in card volume and upwards of 40 billion transactions, and processing volume that is growing by double digits per year.

ChaseNet is, I believe, one of the most forward-thinking and potentially disruptive business models in the industry. This is a 10-year renewable partnership structured with Visa that allows us to bring a closed-loop payment platform to market that will deliver unprecedented value for our merchant community. ChaseNet will also provide new and unique benefits to consumers who have a Chase card and who shop with these merchants. This is a big advantage for merchants, since there are more than 100 million open Chase cards, which constitutes one of the largest consumer bases in the United States.

WEBSTER: Sounds exciting and, as you say, potentially quite disruptive. Anything tangible to talk about so far?

PASSILLA:    Absolutely. We are developing new solutions and several real benefits for merchants who are on the ChaseNet platform and accept Chase cards. As I mentioned, the value merchants will see are higher sales, a reduction in fraud costs, a single view of their cost of acceptance and targeted offers for customers.

We have been working very diligently and with great success to bring these benefits to life using ChaseNet. We have piloted merchants who are up and running today including major media, apparel, renewable energy and health care product companies, to name a few. Merchants are receiving the benefits of a new processing environment, and our pilot-testing activities have resulted in strong performance numbers.

WEBSTER: You describe ChaseNet as a platform, and platforms come in all varieties and sizes and degrees of openness. How open will the Chase Net platform be?

PASSILLA: We have designed our platform to benefit merchants and Chase cardholders. As we continue to develop the platform and bring on new merchants, we will see how we can broaden its availability to other participants in the payments system.

WEBSTER: Chase announced a new payment solution that you call Quick Checkout. Is Quick Checkout an example of something that runs on the ChaseNet rails?

PASSILLA: Yes. Quick Checkout is a simplified checkout process for online and mobile payments that will be enabled via ChaseNet. This is a great example of how ChaseNet can help merchants drive higher sales by reducing checkout time to about 30 seconds instead of two minutes. Chase cardholders won’t have to re-enter their card information or mailing address every time they complete a transaction, and their Chase cards will be automatically updated if they are lost, stolen or expired.

You can assume that we will develop more solutions like this in the future that are geared toward helping merchants improve the consumer shopping experience while also increasing their real-time reporting capabilities (for those enrolled in ChaseNet.)

WEBSTER: Can you give us a little bit of insight into how the ChaseNet infrastructure will enable Quick Checkout to happen, perhaps more efficiently, perhaps faster, than would otherwise have been the case if you didn’t have access to those assets?

PASSILLA: ChaseNet combines the power of Chase Paymentech – one of the largest merchant acquirers and payment processors in the world – and Chase’s consumer business, which has relationships with almost half of U.S. households. This is an unprecedented powerhouse. For example, we contract directly with merchants, which allows for the exchange of important data and other information. This can lead to greater flexibility in the fraud and data protection services we offer.

So ChaseNet’s consumer reach, its brand reputation and its scale on both the merchant and consumer side are the reasons why we can eventually deliver an innovation like Quick Checkout, which offers simplicity and value to the market.

WEBSTER:    Mike, you’ve mentioned your guiding principles a number of times and the importance of serving merchants and consumers. So what does that mean exactly for merchants? And how are you able to deliver things like value and empowerment – to use your words – in a way that’s really unique?

PASSILLA: Merchants say they want three things: more sales, more security and simplified pricing. With the development of ChaseNet and the assets of JPMorgan Chase, Chase Merchant Services is an unmatched answer to their needs, delivering a one-stop shop that provides simple, secure and safe payment and business solutions to merchants.

Specific to sales, naturally, merchants want to increase the basket size – more incremental sales and a reduction in cart abandonment. We think that Chase’s Quick Checkout payment option helps do this by removing the barrier between sales and cart abandonment to make online shopping easier. And through ChaseNet, we also have the ability to bring innovations to the marketplace like targeted offers and other demand-generation capabilities that will help merchants drive higher sales with Chase card customers.

Merchants also want to attack and reduce fraud costs. And so, through ChaseNet’s closed-loop system, we will improve authentication of customers at checkout and reduce false-positives for fraud. This will speed the checkout process while maintaining a very secure transaction environment.

Finally, we’re hearing merchants say that they want simplified pricing. They’re looking to figure out how they can reduce their overall cost of acceptance. So, we offer merchants a single view on cost acceptance for Chase credit and debit cards and also streamline CNP, mobile and card-present costs.

WEBSTER: I know the merchant piece is what you’re really drilling in on, but merchants care about what consumers are getting out of these new payments methods, too. What is the value that you are delivering to consumers?

PASSILLA: Consumers want an easy way to shop online – it can be a hassle now – and the mobile device just amplifies that problem. We also hear that they hate being mass-marketed to – generic offers and loyalty programs just create a lack of trust between the merchant and customer. So consumers want a streamlined and secure online shopping experience coupled with meaningful, relevant and targeted offers that reflect their buying behavior and their buying habits. This is what the ChaseNet platform, coupled with Chase offers, allows merchants to do. Overall, this means we can deliver better customer experiences.

WEBSTER: The Target breach has really brought the whole discussion of cardholder data security into the living room. Do you think that Chase Merchant Services has an advantage since it is operating within a banking institution that has a trusted reputation to keep cardholder data secure and safe, and has a history of doing that?

PASSILLA: Security is a top priority. We understand that we are a meaningful and important player in the world of payment processing, and ensuring that safety, soundness and security is always at the top of the conversation when creating new consumer or merchant solutions. It’s about trust, too. We understand how long it has taken to earn that position, and we talk daily about continuing to deliver that trusted value proposition to consumers and merchants.

Having said this, we understand that we are a part of the payments system and not the sole provider of services in the system. When it comes to breaches, it is important for the representative stakeholders in this ecosystem to work collaboratively to reinforce and, in some instances, reclaim the trust of merchants and consumers overall.

WEBSTER: Getting tactical here on the security topic for a minute, there are many conversations around tokenization. The networks have come out with statements about a standard tokenization scheme. Where do you guys come out on tokenization and whose job is it to set that standard?

PASSILLA: We are focused on ensuring the safety and security of all transactions. And we are big believers in tokenization to help reduce fraud. We play roles on multiple standards committees, and we’re not in a position to declare a future winner on this, but it’s safe to say we are very interested in a single standard emerging over time.

WEBSTER: Let’s switch gears a bit and talk about another popular concept: Omnichannel. We spoke earlier of your online/digital solution but as we all know, the real hard puzzle here is mobile at the physical points of sale.  What are your thoughts with respect to the role of ChaseNet, and Chase Merchant Services more broadly, in cracking that code?

PASSILLA: We’re looking at an agnostic approach of how to bring a simplified checkout experience to consumers across all the channels regardless if it’s in-person, online or mobile. With Quick Checkout, we will determine the best way to help merchants convert shoppers into satisfied customers by providing a smooth, friction-free route to checkout. Merchants are placing bets; other innovators are placing bets. We will be ready with solutions that help merchants deliver the best, most convenient shopping experience for multi-channel consumers.

WEBSTER: So how are you helping merchants sort this out? How do you help guide them in making a decision about what to do, or what kinds of things to consider, when making this decision?

PASSILLA: The simple answer: we continue to do what we do best: listen, advise and engage in meaningful conversations with merchants about their needs. Thanks to the size of our processing business and solutions we provide, we don’t think anyone else can have the same conversations that we’re having with our respective merchant base and the prospects that we’re listening and talking to. Our assets are unmatched. That is why I’m so excited when we get to have a conversation about multichannel consumers and the role that we can play in helping merchants develop payment and business solutions to meet their customers’ needs.

When you’re talking to a large online merchant about the ChaseNet platform, and how they can actually simplify and reduce the lost conversions that are taking place, and you can have a conversation about enhanced data enabled by ChaseNet, those are the kinds of real conversations that other players simply cannot have. We’re a one-stop shop focused on simplicity, value and empowerment and are in an enviable position to have conversations with merchants that others are unable to have.

WEBSTER:    Chase Merchant Service’s clients are many of the same merchants that are part of the MCX coalition. They are also pretty focused on customer data and more narrowly, who really owns the customers’ data. They believe it’s their customer, and it’s their data. Has that come up in any of your conversations with merchants?

PASSILLA: Data sharing is about trust and what is being done with that data by all of the participants in a partnership. If you can show that you’re delivering real value based on the sharing of that data, you actually get a very interested merchant, and client and customer engaged in those conversations because they know data drives sales.

WEBSTER: Mike, what do you think is really important for people to know about Chase Merchant Services?

PASSILLA: The ChaseNet platform is a payments platform, but it’s so much more because it’s backed by JPMorgan Chase and our history of providing simple, secure and safe payment and business solutions. ChaseNet is the cornerstone of being able to deliver a rich set of simple, valuable and empowering solutions to merchants that have largely been under served. Merchants haven’t been empowered to have a meaningful voice and seat at the table, which is why the end result has been a lot of dissention within the merchants and issuing communities.

But we have an ability to de-sensitize some of those conversations and actually deliver a real value proposition just between Chase and the merchant. We are simplifying the relationship with merchants. With ChaseNet, we have a unique ability to engage in a conversation with each merchant that others can’t – conversations that are unique and that lead to unique solutions.

My biggest insight so far is that you’ve got to treat those conversations with the appropriate care and undertaking. You can’t treat all merchants the same, which is unfortunately how I think the vast majority of the marketplace has treated merchants a lot of the time.

Chase Merchant Services’ goal is to give merchants a seat at the table, provide new solutions and real benefits to merchants, especially those who accept Chase cards, to help them drive more sales, reduce fraud costs, simplify pricing and provide more meaningful offers to customers.

So, you can now draw your own conclusions about the direction of CMS and its potential impact on payments and commerce. Lots of details are still evolving related to its business model and how Quick Checkout happens at the physical point of sale, but CMS, leveraging the ChaseNet rails and its 100+ million cardholders, sure seems to have its sights set on disrupting the status quo in payments.

This conversation with Mike about CMS tees up a larger question, though, for me, and that is related to who will ultimately become the “simplifier” of the decision process for merchants as our commerce world becomes more digital regardless of the channels used to initiate payment or the shopping experience.

At the moment, merchants are being bombarded with lots of appeals from lots of players touting “the” solution to moving them closer to this reality. In the absence of any standard, yet, and any sort of critical mass around any one solution on the consumer side, this paradox of choice often leads merchants to no choice. Many players are creating, and enhancing, their platforms in order to play this role. CMS is now the latest entrant with both an operating philosophy and the capabilities to play hard and play big.