Why JPMorgan Wants A Piece Of The SMB POS Market

For SMBs, what’s in the cards … are more card readers.

To that end, the banking giant J.P. Morgan is focused on enabling payments for the millions of small businesses that are the lifeblood of Main Streets across the U.S. – and, by extension, the U.S. economy.

As reported this week, J.P. Morgan is bringing payments to the point of sale (POS), with an eye on making inroads into a landscape dominated by firms such as PayPal and Square. Those latter two firms have been in the in-store POS market for quite some time (Square, for example, since 2009).

J.P. Morgan seems to be banking on speed as a selling point to gain traction with smaller firms. The new service/reader (the reader costs about $49.95, according to reports), termed QuickAccept, will let funds settle to merchant accounts within the same day, known as “fast funding.” J.P. Morgan has said the quick funding comes in contrast to, say, Square, which charges a fee (roughly 1.5 percent) to make instant transfers to merchant accounts. Chase has also said that its new SMB offering will enable firms to take card payments within minutes.

“Our competition either doesn’t have same-day funding, or they charge for it,” Max Neukirchen, CEO of J.P. Morgan’s merchant services arm, said in an interview with CNBC. “We think it’s a great differentiator for businesses because getting money into their account quickly is so important as they manage their cash flow.”

J.P. Morgan wants to migrate more than three million small business customers to the QuickAccept service and is targeting new customers with annual revenue of less than $500,000 who want to avoid paying fees, reports CNBC.

Squaring Off Against Square (et al) 

Chase is, well, squaring off against Square, which – to get a sense of scale – said in its second-quarter results that 75 percent of its $22.8 billion gross payments volume mix came from smaller firms that have less than $500,000 in annual sales.

And in another nod to the convergence of getting paid faster at the point of transactions (which are, of course, becoming ever-more digital), Visa and PayPal have expanded ways for small to medium-sized businesses (SMBs) to get funds more quickly through PayPal, Venmo or Xoom. PayPal’s Instant Transfer service – which uses Visa Direct, Visa’s real-time push payments platform – will feature real-time payments, paid out through PayPal’s Braintree, Hyperwallet and iZettle solutions.

Fiserv, for its part, said in its recent earnings release that its own activity surrounding POS solutions has been on an upswing. Over the summer, Fiserv President and CEO Frank Bisignano said that gross payments volume was recovering and that annualized volumes were about $90 billion. “Order-ahead has become a way of life for many,” he noted on the earnings call. CFO Bob Hsu pointed out that shipments of Clover units were back in positive territory.

As economies reopen, there is a need for flexibility at the POS and for in-store (or curbside) contactless payments – along with the hardware to make those transactions possible. As PYMNTS has noted in past studies, as recently as July, 76 percent of SMBs had been experiencing cash flow shortages – and a whopping 90 percent of Main Street SMBs want access to real-time settlement of funds.

Chase seems willing to forgo at least some revenue streams to keep its SMB customers in-house (cementing the ecosystem), so to speak, and have them on hand to access and adopt additional services as they arise. In terms of the economics of QuickAccept, beyond the card readers, the company will charge 2.6 percent plus a dime a “tap” on transactions; that tally goes up to 3.5 percent plus 10 cents a transaction that is keyed into the mobile app. But it also will forgo monthly fees if SMBs keep either $2,000 in average daily balances, $2,000 in QuickAccept volumes or $2,000 spent on a small business credit card. Square and PayPal do not have monthly fees, but levy fees of 2.6 percent/10 cents and 2.9 percent/30 cents per chip/swiped transaction, and higher for online payments.

The point of sale, then, is fast becoming the new point of competition between a traditional FI and a slew of FinTechs and service providers.