I have pointed out elements of this relationship in various threads across our Credit Cards forums, but one of the key futures I believe of Chase offering competitive reward programs (miles, co-branded or UR) is the ability to bypass Visa's cost structure (the network of all Chase cards except IHG). Now, this is good and bad news.

The good news is that the cost to the merchant (United Airlines, Marriott, Best Buy, some grocery chains, etc.) is that Chase can charge a lower total merchant fee when a Chase branded card is accepted different than any normal Visa. This should allow merchants to still allow Chase cardholders even if there is friction with Visa over fees. Unfortunately, in reality, this isn't happening as much as it should. I suspect the main reason is because of some fears of distinguishing Chase cards versus other Visa cards by merchants and having point of sales arguments. Also, many of these merchants have major business banking relationships with other banks including BofA, Wells Fargo, etc. which they don't want to change. This is also not done in the marketplace except for all-in networks like AmEx or Discover or going back to before Visa/Mastercard when there were brands like BankAmericard.

The bad news is the revenue to Chase on a transaction is lower since it has to offer cheaper merchant fees for this bypass option. It has to make-up the cost of the co-branded extra rewards offered through other means, this is typically through annual fees or creating financial value of enhanced cardholder transaction information (marketing data!).

So basically, here is what has happened.

Chase has hired many people from AmEx who are used to an "all-in" network. This lead to the ChaseNet infrastructure which publicly is indicated to be separate from other interchange (Visa/MC) infrastructure, but in reality, it might still be running on Visa's hardware as a rented, white-label network (technical design issue). Now, regulation years ago allowed merchants to route transactions however they want. Visa got smart to this and started making deals with payment processors and offering discounts to avoid this type of transaction (and payment loss).

For a few years now, Chase has already been working with its big merchant accounts and offering this discount behind the scenes. For some like Marriott, it is like them having a private chain-only payment card when someone uses a Marriott/Chase co-branded or Chase visa (unsure what has happened now with the AmEx cards, but I would suspect AmEx has matched the merchant fees Chase is offering). So, Marriott is incentivized to have people pay for stays via Chase cards (does not seem to only include Marriott co-branded cards).

Chase has gone out a bit more public and started talking about Chase Pay as a branded payment option. This is similar to PayPal. The key difference here is that this transaction selection is now more consumer facing. It also allows merchants that did not want to run all of their payment processes through Chase to have a channel to take advantage of Chase's merchant fee scheme. Now, we all know the issue, the number of consumers willing to jump through these hoops without significant incentive (most cost to Chase) is very small, and the friction to use Chase Pay is not small.

So where are we at:

-Chase via its team experienced from AmEx is pushing to be more aggressive in driving its revenue on merchant services. Using this ChaseNet bypass approach to reduce what it gives from that merchant fees to Visa is a big part of that initiative.
-Visa blinked and gave Chase flat rate access to its network (looks like that deal goes to 2022). So, Chase's need to differentiate from Visa diminished significantly, but it did push Chase quickly to eliminate Mastercard-branded cards from their network where it could.
-Chase is big enough to be a card brand domestically on its own without Visa.
-Chase is not getting merchants to go this route easily because of the complexity to adjust its payment systems. It appears airlines are next as UATP (the main airlines payment processor) added Chase Pay. UATP also handles the PayPal option when you see it on airline websites.
-Chase still needs bigger merchants to better execute these plans. Its team intentionally chased companies including Kroger, Wal-Mart, Starbucks, etc. Starbucks did the integration, but Wal-Mart and Kroger have been much more deliberate.

At the end of the 10 year Chase/Visa deal, Chase could either go on its own, having enough market share to handle its own transactions, it could renew again with Visa, or it could make a run at buying another network again (Discover or AmEx). What Chase is doing with all of its massive reward and co-branded cards is building up volume to make the decisions easier. Already, it is clear to consumers having a Chase card is different than having a card from another issuer. It is also probably strange to also think that most of the Chase card payment business does not make a lot of profits.

References:
https://merchantservices.chase.com/290pricing_cc1 (Chase Transactions listed separate from Visa/MC/Amex/Discover)
https://www.reuters.com/article/us-j...0R80B620150908 (Chase signing the 10 year flat fee Visa network deal lease)
https://www.chase.com/digital/digita...ant-terms.html (ChaseNet defined as outside the normal interchange networks)
Payments ? Civil War? ? Noyes Payments Blog ($50 billion running through ChaseNet, bypassing normal Visa interchange, but not as profitable because Chase has to charge less than Visa)