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The good news in JPMorgan Chase & Co.'s blow-out second-quarter results: Banks may finally be done bleeding money. The bad: It could be a while before they really start making any more of it.
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JPMorgan Chase & Co. is taking a hard line with some borrowers who want to sell their homes for less than they owe on the mortgage and avoid foreclosure.
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By offering a mobile service that addresses a common need, JPMorgan Chase & Co. might also get people to use their phones for a type of payment of which few people are even aware.
Last week's update of JPMorgan Chase's application for Apple Inc.'s iPhone added two important features: mobile remote deposit and person-to-person payments. To deposit a check, customers photograph it with the iPhone's camera and send the image to the bank.
Though the features were developed independently in-house, they were introduced together, and the New York banking company said that users of the remote deposit capture feature could quickly warm to using their phones for new payment types, including person-to-person transfers.
"The more people start using their phone and seeing their phone as a payment … or a banking device, you're going to get adoption of a broader array of services," said Jack Stephenson, JPMorgan Chase's director of mobile, e-commerce and payments.
Stephenson said that, though both payment services have already had "very high adoption," it was too soon to determine how their uses overlap or whether remote deposit users would graduate to P-to-P.
"Our strategy is around convenience," he said. "You want to allow customers to do business in the channel of their choice," and to allow that, JPMorgan Chase has to provide access to many different transaction types on mobile devices.
Stephenson said these services were introduced on the iPhone and iPad first because these devices have the most users. JPMorgan Chase plans to expand its mobile services to other devices, but Stephenson would not say which ones or when.
Though person-to-person payments are sometimes offered as a stand-alone service, industry players are beginning to realize that consumers do not see it that way. Citigroup Inc., in its tests of Obopay Inc.'s mobile payment service in 2008 and 2009, determined that many users wanted mobile payments to be integrated with other services.
Fiserv Inc. said it has observed the same pattern, though with bill-pay instead of remote capture.
Erich Litch, a Fiserv senior vice president and its general manager for consumer services, said, "Any time you can get a user to make a mobile transaction, you're going down the right road."
A survey that Fiserv did in June last year of 1,022 U.S. online consumers found that 35% of bill-pay users said they would use a P-to-P payment service in a typical month, higher than the 23% who do not use online bill-pay but would consider P-to-P.
Litch said this applies to people who pay bills on their home computers but that the effect is even stronger for those who have also begun paying bills on their mobile phones. Fiserv has 100 clients for its mobile bill payment system. It has no customers for the mobile version of ZashPay, its new P-to-P system, though its first online ZashPay customer went live in June.
Andrew Schmidt, a research director at TowerGroup in Needham, Mass., said that, since people are already comfortable with checks, mobile remote deposit capture may be a more welcome means for some users to familiarize themselves with mobile payments.
"You want to create awareness, you want to boost comfort," he said. "If you could use mobile remote deposit capture as a way to facilitate payment in general, it could spur the more effective development of mobile payment offerings that could perform the same function without the need for paper."
Fiserv's approach is just as valid as JPMorgan Chase's, Schmidt said. "They're starting off with their online bill-pay because that's what they're best known for," he said.
Such entry-level mobile payment services are particularly necessary for older mobile banking users, who may be less enthusiastic about doing anything beyond basic banking with their mobile devices.
"I can't imagine my parents making a mobile payment without some way to first raise their comfort in mobile as a channel for payment to begin with," Schmidt said. Mobile remote deposit capture could satisfy this need.
He warned that it is possible — though unlikely — that mobile remote deposit capture could have the opposite effect, rekindling interest in paper-based payments. "I sincerely hope that it doesn't slow the decline of check usage in the U.S.," he said.
Red Gillen, a senior banking analyst at the Boston market research firm Celent, agreed that JPMorgan Chase's approach could make mobile payments more appealing to its customers.
"The mobile remote deposit capture is definitely going to reinforce the idea of mobile P-to-P: I can be paid; I can have funds put into my account through my phone," he said.
Earlier attempts to pitch mobile P-to-P have focused on use cases that customers do not care about, such as using a phone as an easier way to split a dinner check.
Whereas bankers may believe dinner-check splits are a common problem, "it's really hard for us to remember what it's like on the ground for the average person," Gillen said. "It's a relatively rare use case. I mean, how often do we do that?"
By contrast, mobile remote deposit capture makes it easier for consumers to deposit paper checks, a use case that "seems to be addressing a problem that exists," he said.
Another example of a successful use case for mobile payments was the recent surge in donations for aid to Haiti through mobile phones after the country's catastrophic earthquake. "For the first time, people made mobile payments" on a large scale, Gillen said.
Each of these examples "is just chipping away at the general population … to get them more aware," he said. "All these things should start to raise people's awareness that the mobile phone can be used for payments."
