Mike Passilla, JPMorgan Chase's new merchant services boss, didn't take a sledge hammer to the digital payment startups that are chewing away at incumbent payments companies, but his message was clear—Chase is one of the biggest guys on the block, and it plans to use its data and technology heft to win in the merchant acquiring game.

"Innovation is not left to the nonbanking world. It's not solely the playground of those that are not in banking services," says Passilla, the former president and CEO of Elavon, who on May 28 was named JPMorgan Chase's new CEO of merchant services

At Chase, Passilla assumes a new role created to lead the financial institution's expanding payments and merchant services business, including Chase Paymentech.  In another move, Dan Charron was named president of Chase Paymentech, the company's global payment processing and merchant acquiring business. Charron had been the acting head of Chase Paymentech since March, and was previously head of client services.

Merchant acquiring and payments processing have become very competitive due to e-commerce startups like Square that allow merchants to use smartphones and tablets to accept payments, and other payment companies such as PayPal, which is expanding aggressively into retail and mobile point of sale acceptance.

While Chase does and will continue to partner with technology companies, Passilla says the bank has a vigorous technology strategy and scale that places the institution ahead of the pack.     

"We will continue to produce and invest in new and unique ways to bring real value and real solutions that have direct meaning to our merchant community—that result in more sales within the four walls of their stores. I do believe that Chase's assets are unique and differentiated in the marketplace," he says.

Chase plans to expand and deepen the ability of merchants to communicate with consumers in a personalized way, via marketing or special deals.

"Offers will be a big part of that, offers that are targeted, scored and delivered to the right consumer at the right time," Passilla says, adding that this approach is something that the payments industry as a whole has struggled with.

Chase's merchant expansion strategy will also be driven by its new processing partnership with Visa, as well as the bank's existing base of more than 50 million cardholders. The bank will also rely on Chase Paymentech, which processed more than 30 billion transactions in the past year totaling more than $655 billion.

"Chase has shown a willingness to invest in innovation that uses that data set," Passilla says. "From an offers standpoint a lot depends on the data, and the depth and volume of the data assets of Chase are unparalleled in the industry." 

Other companies targeting merchants with payments services, such as PayPal, are also touting their ability to accrue and analyze customer data to strengthen consumer relationships and provide targeted marketing. Chase's substantial presence on both the card issuing and acquiring side puts it in a unique position to mine data to build programs that can attract merchants, says Richard Crone, a payments consultant.

"Up to this point most financial institutions and big issuers relied on the branded networks to do that," Crone says, adding the bank can also use its mobile technology as a way to build special offers tied to a consumer's mobile banking activity.

"Chase needs to bring in new talent that is very skilled in understanding all of these moving parts, and the innovation that will come from mobile in particular, and Passilla is a worthy candidate," Crone says.

Passilla's background with technology development also provides the broad skills required in the current market. "A person that is managing a merchant acquiring business needs to be an established blue chip company person and a startup person—you have to have qualities of both to have success," says Arkady Fridman, a senior analyst at Aite Group.

While at Elavon, the payments processing division of U.S. Bancorp, Passilla was instrumental in developing The Grove, an innovation lab.

"I'm a big fan of the 'centers of excellence' approach and there are examples of that at Chase," Passilla says. "We will continue to invest in that strategy."

JPMorgan Chase is also under pressure to manage merchant services as part of a broader payments and financial services strategy.

"Retailers and merchants are increasingly sophisticated and strategic in selecting their financial services institution partners," says Philip Philliou, a payments consultant.

"Merchant services are becoming increasingly important [for financial institutions] because the clients are looking at it that way. They look at merchant services as one leg in an important stool in financial services," Philliou says.

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