Chase Merchant Makes a Play for More Bill-Payment Business

Chase Merchant Services LLC has launched a processing and consulting arm aimed at helping billers set up and manage bill-payment services. In a press briefing today, Chase executives stressed the new service, called BillPay Recurring Biller Solutions, would embrace cards as well as alternative payment types such as the automated clearing house and PIN-less debit, and would also focus on cutting acceptance costs for payments. The gambit is also calculated to lead to more bill-payment volume for the merchant-acquiring arm of banking giant J.P Morgan Chase & Co., which currently serves 65 biller clients. Although most billers are increasingly moving payments to electronic forms, the Chase executives said, much more needs to be done. “We see a need out there from a biller perspective,” said Robert Wechsler, executive vice president and general manager for Chase Merchant Services. “That's why we launched this group.” The new service will also push the so-called biller-direct model for electronic payments, in which consumers pay bills directly to insurance companies, utilities, cable firms, and other billers on their Web sites or through their interactive voice-response systems. The alternative model, in which a bank or third party pays all bills for the consumer, leaves the merchant with far less data on which to build loyalty campaigns, Wechsler said. “Biller-direct gets them customer data,” he said. “You have direct interaction with your customers.” By emphasizing electronic payments, the service hopes to demonstrate to potential clients that they can chop what Chase calls the “total cost of acceptance” for transactions. The idea, Wechsler said, is to get beyond transaction fees and look at how such costly items as live as well as IVR customer-service calls and paper statements can be reduced. But significant savings in processing costs can be had just by converting more payments to electronic forms, particularly the ACH and PIN-less debit, Wechsler said. A merchant-processing alliance with First Data Corp., Chase Merchant Services offers card processing but also ACH and PIN-less debit, a form of PIN debit for the Web in which consumers can pay bills in certain biller categories by entering account numbers but not PINs. Chase's provider for PIN-less debit is First Data's Star electronic funds transfer network. Conversion of more transactions will bring increased costs in ACH and PIN-debit interchange fees, the company says, but these will be more than offset by savings in processing costs for cash and checks. Indeed, Wechsler said the bulk of transactions flowing through PIN-less debit is coming from cash and checks so far. PIN-less debit “is the biggest opportunity for expansion we have,” said Thanassis G. Mazarakis, president of Chase Merchant Services and a member of today's panel. PIN-less debit is popular with many billers because it offers online authorization and guaranteed funds at PIN-debit interchange rates, which are substantially lower than credit card and signature-debit rates. The payment type, introduced in the late 1990s by the major EFT networks, has begun to take off in the past two years as the networks have added biller categories where it can be used. These now include insurance companies and secured lenders, for example. But it has also sparked controversy. Early this year, Visa USA felt compelled to issue a rule clarification, effective last month, requiring that bill payments starting out as check card transactions be routed as such through VisaNet, Visa's backbone network. The stricter policy, Visa said, was necessary because some check card payments were being converted without the consumer's knowledge into PIN-less debit transactions (Digital Transactions News, March 4). The move, however, left some observers suspecting that Visa's real intent is to stifle the payment channel (Digital Transactions, “Trends & Tactics,” May-June).