--J.P. Morgan will work with Visa to develop processing service for Chase Visa card transactions
--Bank will distribute deals to its cardholders through individual merchants
--Bank will negotiate directly with merchants, who may get lower prices on processing fees
By Andrew R. Johnson and Matthias Rieker
J.P. Morgan Chase & Co. ( JPM ) is upping the ante in its battle for share of consumer spending.
The New York bank is expanding a relationship with payments network Visa Inc. ( V ) through which it will target special
deals and offers exclusively to its own credit- and debit-card holders at the checkout counter.
The move is an aggressive bid to capture more business from consumers and merchants, offering both camps incentives to
use J.P. Morgan products and services instead of those from another bank.
Consumers potentially would save money or receive additional perks for swiping a Chase Visa card instead of another
piece of plastic in their wallet. Retailers may be able to negotiate better rates on the fees they pay to accept J.P.
Morgan cards and generate more sales by enticing consumers with the bank's deals.
"Chase is going to attempt...to provide its cardholders with a better experience at the checkout lane than is
available from its competitors," said David Robertson, publisher of the Nilson Report, a newsletter that follows the
The deal builds on a long-standing partnership J.P. Morgan has had with Visa, the world's largest payments network.
The bank is Visa's largest issuer of credit cards in the U.S., and it also operates one of the largest merchant-
acquiring businesses--Chase Paymentech--that handles card transactions for retailers.
Under the new 10-year agreement, J.P. Morgan will license use of VisaNet, Visa's processing network, to develop its
own processing service. The service would be separate from Chase Paymentech and process transactions made with Chase
Visa cards. The service is expected to be running by the end of the year.
"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."
Card issuers have recently jumped into the merchant-offers industry once dominated by the likes of Groupon Inc. (GRPN)
and LivingSocial in a bid to entice cardholders to spend and prevent them from using a competitor's card.
Competition for card customers has intensified since the financial crisis as banks largely have focused their efforts
on attracting consumers with the best credit quality and the slow economic recovery has caused many customers to rein in
American Express Co. ( AXP ) offers deals through mobile apps, its website and social-media platforms like Foursquare,
Facebook Inc. ( FB ) and Twitter. Bank of America Corp. ( BAC ), Capital One Financial Corp. (COF) and other banks are also
offering different deal platforms to their clients.
Foursquare, a mobile service that lets users check in to locations through a mobile app, said Tuesday it struck deals
with vendors First Data Corp. and CardSpring, allowing users to sync their Visa and MasterCard Inc. ( MA ) cards to its
service. Users who do so can earn discounts on purchases they make with their cards when they check in at merchants.
J.P. Morgan in December said it was buying daily-deals provider Bloomspot Inc., the assets of which it planned to use
to create special offers tied to using its credit and debit cards.
For Visa, the deal with J.P. Morgan solidifies a relationship that some investors had feared was at risk of shifting
to competing payments network MasterCard, according to Darrin Peller, an analyst with Barclays. The worry was the bank
would move some of its business to MasterCard after its existing contract with Visa expired because of dissatisfaction
over pricing changes Visa made affecting merchant acquirers such as Chase Paymentech, Mr. Peller said.
At J.P. Morgan's investor day last year, Gordon Smith, then CEO of the bank's credit-card business, said one of those
changes would raise prices "for many merchants." "We have no influence on their pricing in any way, but we think it's a
bad thing," said Mr. Smith, who is now CEO of consumer and community banking for J.P. Morgan.
The expanded partnership also will result in J.P. Morgan shifting more transaction volume to Visa as opposed to other
card networks, the companies said.
"For Visa, it's a win," Mr. Peller said.
J.P. Morgan's ability to offer discounts to its customers through specific merchants is partly the result of a recent
rule change Visa made. Previously, Visa prevented retailers from offering discounts and other perks at the point of sale
to customers who used a specific bank's card, according to a spokesman. Such offers now are allowed under the change,
which was first reported by American Banker on Friday.
"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.
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 is 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 provide 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 shares were down 0.3% at $47.58 in recent trading, while Visa shares were up 1.4% at $158.11.
Write to Andrew R. Johnson at firstname.lastname@example.org
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
Copyright (c) 2013 Dow Jones & Company, Inc.