JPMorgan Chase just announced a new payment platform: Should Square and PayPal investors be worried?

JPMorgan Chase (NYSE: JPM) deploys a new card reader that pairs with a merchant’s smartphone, as well as a new checking account for small businesses and a payment platform called QuickAccept. Users can expect their sales to show up in their Chase commercial accounts on the same day at no additional cost for fast processing time.
The new platform will have processing fees on par with what competitors love Square (NYSE: SQ) and Pay Pal (NASDAQ: PYPL) fees, with fees of 2.6% plus $ 0.10 for tap, dip or swipe transactions with the card reader, or 3.5% plus $ 0.10 for non-card transactions entered in the app mobile.
JPMorgan Chase plans to pair the new card reader with a new type of business account, called Chase Business Complete Banking, which has no monthly fees if certain balance or volume thresholds are reached, including $ 2,000 in payment volume. Monthly QuickAccept. With millions of small businesses already doing business with Chase and a more favorable cost structure for immediate payments, should Square and PayPal investors be concerned?
Image source: Getty Images.
Why PayPal and Square should to worry
On the surface, this appears to be a potential problem for Square and PayPal. After all, JPMorgan Chase is the largest bank in the United States with over 3 million small business customers that it could potentially convert into users of its product. That’s close to the total number of businesses using Square’s platform.
Additionally, JPMorgan’s product aims to address some of the biggest issues facing PayPal and Square customers. Specifically, the same day free deposit feature is something that the competition does not offer or charge for. For example, Square adds a 1.5% fee if a merchant wants instant transfers, and that’s on top of the standard processing costs.
Why PayPal and Square should not worry (not yet, anyway)
On the other hand, there are good reasons not to worry. For one thing, this new platform should only appeal to current Chase customers. Put simply, most businesses have relationships with financial institutions, and that probably won’t cause customers of other banks to switch, at least not in large numbers. Chase therefore realistically targets only the part of the activities of these fintechs that are already bank customers.
Additionally, and perhaps most importantly, there is much more to the businesses of Square and PayPal that are likely to help build customer loyalty, even if a merchant is also a customer of Chase. To give just one example, PayPal simply does online payment better than anyone else (not to mention that there are millions of consumers who prefer to use PayPal when shopping online). Square offers a streamlined business lending platform through Square Capital that is a lot easier for most businesses than getting a bank loan, and offers more payment hardware beyond a simple card reader connected to a smartphone.
What investors should watch out for
To be perfectly clear, I don’t think JPMorgan Chase is going to bankrupt Square and PayPal, or even that it will take a significant amount of payment volume from either. fintech central. I’m a Square shareholder right after the IPO and I don’t plan to sell anytime soon.
what is that Is The spectacle, however, is that traditional banks aren’t just going to sit idly by and let high-end fintechs have fun. It will be interesting to see not only how JPMorgan Chase’s new payment platform develops, but also if other major banks follow suit with similar offerings.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.