By Dow Jones Business News, February 26, 2013, 12:52:00 PM EDT
By Andrew R. Johnson and Matthias Rieker
J.P. Morgan Chase & Co. ( JPM ) will offer discounts and other deals to its cardholders at the check-out counter through
a partnership with Visa Inc. ( V ) in a bid to capture more business from merchants and consumers.
The New York bank said Tuesday it is developing a private processing service that will negotiate deals directly with
retailers and potentially offer lower fees that merchants pay to accept cards.
"It allows us to go to merchants and strike our own [deals] with merchants," Jamie Dimon, chairman and chief executive
of J.P. Morgan, said during an interview at the bank's annual investor day in New York. "We just think it will be a
better relationship between us and the merchant."
The bank plans to distribute offers to cardholders through participating merchants that would be applied when a
customer pays for a purchase.
In December, J.P. Morgan said it was buying daily-deals provider Bloomspot Inc., the assets of which it would use to
create special offers tied to using its credit and debit cards.
The use of deals has become more common in the credit-card industry as lenders look for ways to spur spending by their
customers. American Express Co. ( AXP ), for example, offers deals through mobile apps, its website and social-media
platforms like Foursquare, Facebook Inc. ( FB ) and Twitter.
Foursquare, a mobile service that lets users check in to locations through a mobile app, said Tuesday it struck deals
with Visa and MasterCard Inc. ( MA ) allowing consumers to sync their cards with its service, similar to its deal with
American Express.
Users who do so can earn discounts on purchases they make with their cards when they check in at merchants.
J.P. Morgan is already one of Visa's biggest clients. It is the payment network's largest credit-card issuer and also
operates one of the biggest merchant-acquiring businesses, Chase Paymentech, which handles card transactions for
retailers.
Under an expanded 10-year deal, the bank said it will license VisaNet, Visa's processing network, to build a service
that will help process transactions made with Chase Visa credit and debit cards. The bank must sign agreements with
individual merchants to accept the service, which should be running by the end of the year.
The partnership will also result in J.P. Morgan shifting more transaction volume to Visa as opposed to other card
networks, the companies said.
"If you go to merchants, what they always complained about" was "Visa's got all these operating rules," Mr. Dimon
said. Merchants have asked "Why can't we just deal with you directly, and now we can," he said.
The deal comes as banks are fighting for new business opportunities being created by technology enabling consumers to
pay for purchases with smartphones instead of swiping a piece of plastic. Banks and card networks are also working to
mend relationships with retailers, who have constantly complained that the costs they pay to accept cards is too high.
Visa and rival card network MasterCard are awaiting final approval of a class-action settlement reached last year in
long-running litigation over so-called swipe fees. Merchants had sued the networks, along with big card issuers
including J.P. Morgan, accusing them of conspiring to set the fees at arbitrarily high levels.
Visa's new CEO, Charles Scharf, who ran J.P. Morgan's retail bank for several years before joining the card company in
November, has said one of his goals is to strengthen ties with merchants and shed the company's image that it's too
cumbersome to work with because of operating rules it requires retailers to abide by.
The partnership with J.P. Morgan is "one example of Visa's increased flexibility and desire to partner with financial
institution and merchant clients to provider greater service to cardholders through tailored and value-added solutions,"
William Sheedy, group president for the Americas at Visa, said in a statement.
J.P. Morgan's shares were down 1.5% at $46.98 in recent trading while Visa's shares were up 0.5% at $156.73.
Write to Andrew R. Johnson at andrew.r.johnson@dowjones.com
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02-26-131252ET
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