(Bloomberg)—The mobile payment wars are making their way to a grocery store near you.
Kroger Co., the largest U.S. supermarket chain and No. 88 in the Internet Retailer 2017 Top 500, will begin offering JPMorgan Chase & Co.’s Chase Pay mobile wallet in certain markets beginning next year, the two companies said Tuesday in a statement. The partnership will be Kroger’s first venture into mobile payments as the retailer seeks to bring its shopping experience into the digital age.
Mobile payments have been slow to take off in the U.S. compared with other parts of the world as some merchants have balked at the higher fees associated with the technology and consumers have shown little interest in embracing it. Only about 0.5% of customer transactions on Visa Inc.’s network involves tokenized technologies such as wearables, digital wallets and mobile phones, the world’s largest payments network said at a conference in October.
That has prompted banks, card networks, retailers and technology companies to pour investment dollars into their own payment applications in the hopes of developing the winning combination that will drive consumer adoption. Apple Inc. (No. 2 in the Top 500) recently debuted a person-to-person payments network in the hopes of increasing usage of its Apple Pay service, while JPMorgan acquired Merchant Customer Exchange LLC’s payment technology this year to expand its capabilities.
“With groceries, it’s a really key category for us, not only because of the volumes of transactions there, but because of the frequency,” said Tom O’Brien, JPMorgan’s managing director of Chase Pay.
For Kroger, the partnership with Chase made sense because the lender’s mobile wallet uses the familiar barcode-like system that the supermarket already employs to scan grocery items and other products. That means Kroger was able to retain its existing infrastructure instead of having to set up a new system like those used to process near-field communication, or NFC, transactions, Chris Hjelm, the retailer’s chief information officer, said in a telephone interview.
Barcode, or QR, transactions also offer the retailer more data about a consumer than NFC systems, Hjelm said. Kroger is hoping to introduce Chase Pay to about 600 stores next year.
Amazon’s foray
The mobile payments market is estimated to reach $283 billion by 2021, and banks are fighting to remain relevant after years of ceding ground to Silicon Valley upstarts such as PayPal Holdings Inc.’s Venmo. Visa and Mastercard Inc. have also developed their own digital wallets, as has Samsung Electronics Co., Starbucks Corp. (No. 462) and other retailers.
Kroger has been expanding in its digital operations, including a recent partnership with Instacart to provide home delivery. Since Amazon.com Inc. (No. 1) rattled the food industry by announcing in June its agreement to buy organic grocer Whole Foods Market Inc., investors have wondered if Kroger can survive the e-commerce giant’s push into the grocery business. Cincinnati-based Kroger’s shares have declined 23% this year.
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