Originally Posted by
rasheed
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).
When Chase uses ChaseNet to bypass Visa's cost structure, they also give the merchant a lower processing fee. So it's not at all clear that this improves their profits from the transaction and enables them to offer more competitive reward programs.
Originally Posted by
rasheed
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.
I don't think that's true. ChaseNet still runs over the Visa network. Visa is most likely not going to allow merchants who don't accept Visa to use their network, regardless of who is on the other end of the transaction. I'm fairly certain that Visa would have put such a requirement into the agreement before allowing Chase to run their own transactions from end to end.
Originally Posted by
rasheed
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).
While Marriott may have this incentive, there's not much they can really do about it. I can't imagine any merchant giving a discount for paying with a Chase card in general. A co-branded card, sure. But giving a discount for using a card from a certain issuer would be very unmanageable. Many people don't even know the issuer of their card if it's co-branded, such as the Southwest and United cards which don't say "Chase" anywhere on the front. Marriott is going to have a tough time explaining why they give a discount for using a United card but not a Delta card.
Originally Posted by
rasheed
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.
I haven't used Chase Pay so maybe I'm not understanding this correctly, but my understanding is that it does not require merchants to use Chase as their merchant bank. The payments are processed by their usual merchant bank, at the same rates. The only thing that changes is the method of entry (QR code rather than chip). If a merchant is not using Chase as their processor, I don't see how they can take advantage of Chase's merchant fee scheme. Their processor is going to run the transaction through the usual channels.
Originally Posted by
rasheed
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).
I don't think Chase could go on its own. It's not just about market share, but reach. If Chase wants to be a viable card network, they will need a broad range of merchants to sign up, at least as many as Discover. They will also need to get other merchant services banks on board, because it's obviously not feasible to require that every merchant have an account with them. Other merchant services banks are probably not going to want to support their competition.
Originally Posted by
rasheed
Already, it is clear to consumers having a Chase card is different than having a card from another issuer.
Not at all clear to me. What is the difference? I have a CSR, but I will dump it after getting and using the sign-up bonus.
Overall, I think you are reading far too much into this. Chase simply got a good deal from Visa due to their volume. Visa was willing to give them a discount if they do their own processing on the network. I don't think this is some major shake-up.