Brief:
- Chase, the biggest issuer of general purpose credit cards with $141.8 billion in outstanding balances, will offer 5% cash back for Chase Freedom cardholders when they pay with a mobile wallet in Q1 2018. The offer is good on the first $1,500 spent on all items using Chase Pay, Apple Pay, Android Pay or Samsung Pay, according to a press release.
- Cardholders can also earn 5% back when they make qualified purchases — through mobile wallets or traditional payment methods — at gas stations, streaming services Spotify, Hulu and Netflix and merchants of internet, cable TV and phone services.
- The deadline to activate the offer is March 14, and is retroactive back to Jan. 1, per the release. Otherwise, Chase Freedom cardholders will receive the standard 1% cash back on all purchases.
Insight:
Interestingly, Chase Freedom is offering rewards for people who use Chase Pay or who have their credit card loaded into a third-party payment service like Apple Pay, Android Pay or Samsung Pay. Basically, Chase is promoting mobile payment methods overall while emphasizing its role in adding value to consumers' electronic wallets. Chase Pay is a separate app from Chase Mobile, but the bank may need to eventually combine the two, especially as banking services become more commoditized and non-bank wallet providers add more functionality.
Banks like Chase's parent company J.P. Morgan Chase are struggling to stay relevant as payments shift to mobile platforms and blockchain technologies that give consumers more freedom to manage their money outside of a traditional banking system. Chase is one of the few traditional banks to offer a mobile wallet, but overall these financial institutions have been playing catch up. While U.S. consumers have been relatively slow to adopt mobile pay methods, they are increasingly popular with younger consumers, suggesting continued growth.
More than half (54%) of Americans explicitly said they don't prefer mobile payments, according to a study by researcher Kantar TNS cited by eMarketer. American mobile consumers said the key obstacles to adoption in the country included "concerns about security and a lack of understanding of [mobile payments'] potential benefits," consulting firm Deloitte found in a November survey.
The challenge for banks will be to find their place in a financial system that is evolving with digital and mobile technologies. Banks have tended to focus on developing apps for mobile banking — such as setting up electronic payments and more recently for depositing paper checks — while technology companies have focused on payment services. PayPal created a digital wallet to help people make internet purchases, and the popularity of smartphones has pushed Apple, Google and Samsung to offer mobile wallets. Those wallets depend on uploading a bank card and authenticating it, which means that banks still act as intermediaries for most contactless payments.
