The biggest innovators in payments aren't necessarily banks, and that's a problem for JPMorgan Chase, which has such a large client base that every startup sees it as a target.
While banks took a back seat, technology companies like Stripe and PayPal's Braintree swept in to work with the most ambitious upstarts, including Lyft (Stripe) and Uber (Braintree). Many companies try to compete by becoming the next Uber, but Chase doesn't want to be the next Uber — it wants to be the next Stripe.
"You have Square, Stripe and Braintree in this market," said Rich Aberman, co-founder and chief strategy officer of WePay, which Chase is acquiring. As part of Chase, "we can now say we are the API layer to [4 million] small businesses. That's transformative," he said.
The bank's earlier investments have paid off in unexpected ways. For example, the Chase Pay mobile wallet is actually an incarnation of ChaseNet, a project initiated in 2013 in partnership with Visa. The result is a system that sharply streamlines the payment process, improving security while erasing costs, the bank has said.
The key to Chase Pay — and perhaps, to everything about Chase's transformation — is its scale. Chase Pay provides the most benefits as a closed-loop network, when both the merchant and consumer are Chase clients. Chase's plans for WePay have to be just as ambitious, with the bank's 4 million small to medium sized business clients at stake.
"We see more business owners that want to have the payments integrated with the software that runs their businesses. We want to be in position to take advantage of that," said Rob Cameron, Chase's head of partnerships for North America and president of Canada for Merchant Services.
With its size, Chase can make deals quickly, whether it's acquiring mobile wallet technology, investing in small-business mobile marketing, or buying cloud software that will embed its Chase Pay app into small businesses as part of a broader suite of online offerings.
Chase's investments have given it technology from the former Merchant Customer Exchange, collaborative access to LevelUp's deals and WePay's application programming interface. All of these will power marketing and payments for small to medium sized businesses, according to Cameron.
"When you add Chase Pay to all of this technology, a business can allow people to pay with points at a small business through a mobile app, the same way they do at Starbucks," Cameron said.
WePay will act as a referral engine to spread mobile payments, order ahead, marketing and other services across a range of e-commerce businesses that could benefit from demographic or geographic synergy.
While there is certainly some urgency on Chase's part to have the right technology in place, the same urgency is felt on the merchants' side, where Amazon's purchase of Whole Foods and its experiments with cashierless checkout threaten any brick-and-mortar company.
Among financial institutions, Chase is moving faster to address this trend for its small businesses, said payments consultant Richard Crone, who likened its investments in LevelUp, MCX and WePay to Walmart's acquisition of Jet.com as an e-commerce accelerant to battle Amazon.
"The trend is making payments invisible and subsumed into the customer experience," said Crone, adding the payments industry refers to this as "integrated payments...it's a competitive threat to all financial institutions from a branding and value-added positioning. The future is in embedded payment, subsumed into the customer experience and not a separate step processed at a point of sale terminal."