Recent reports are hinting that seven of the big names in the banking world, including Bank of America, JPMorgan Chase, and Wells and Fargo, are developing a digital wallet that people can use to shop online.
Ever since the likes of PayPal and Apple Pay have lured hundreds of millions of users to their digital wallets, big banks have been grasping at ways to pull them back into services they control. This is one of the driving motivators behind the building of this new digital wallet – to prevent banks ceding customer relationships to big tech firms, like Apple. While online payments may be the headline motivation, the banks are also said to be concerned about Apple’s move into broader financial services, including a reported collaboration of a savings account with Goldman Sachs Group Inc.
The banks are working with the money-transfer service Zelle to create this new digital system, which will allow shoppers to pay at merchants’ online checkouts with a digital wallet that will be linked to their credit and debit cards. Rumors suggest it could be rolled out in the second half of 2023, with more than 150 million customers eligible to use the service. The plan is to launch the wallet with Visa and Mastercard debit and credit cards, with the intention to add other card networks in the future.
The digital wallet will be managed by Early Warning Services LLC (EWS), which is a company owned by the banks that currently operates the Zelle service. However, reports indicate that the new wallet will be separate from Zelle.
It shouldn’t come as a major surprise that these banks are taking a big interest in digital wallets. With mobile payments becoming more and more common across industries, and digital wallets becoming more and more popular with customers, particularly amongst the younger generations, it makes good business sense to jump on board.
The benefits of using digital wallets are vast, which is why both startups and large companies alike are using them to expand their area of operation and attract larger audiences. Speedy withdrawals, particularly when they can happen the same day, are one of the major benefits, which is why they are popular within industries like gambling. For those playing online casino games, being able to make quick withdrawals is crucial to a smooth user experience, especially since any delays in withdrawals might result in players betting their winnings again.
Uber is another company who has jumped on the bandwagon of digital wallets. Their new division Uber Money, which includes a digital wallet, enables digital payments to ensure the wellbeing of both the riders and the drivers by limiting unnecessary physical contact and creating a stress free way to travel.
Details of how the new system will work are still being finalized, but it is believed that customers using their wallet wouldn’t have to type in their card numbers. Instead, a tokenized number would be provided to the merchant. This is in an effort to lower the risk of fraud and rejected payments that result in lost sales. For merchants, this new wallet would simplify the checkout experience to a few clicks, which should help to decrease cart abandonment.
So, should Apple be worried? Apple Pay is the current market leader in digital wallets, forecast to have 48.7 million users in the US in 2023, with one in six customers using it at least once a month. This new digital wallet won’t be the first competitor for them or for PayPal, as they already have one in the form of Google Wallet. While Meta and Samsung are competitors in the space too, neither of these has gained as much market traction.
American banks have often been criticized for being slow to roll out new and innovative services in the past, let alone a joint wallet, but having the existing potential customer base of 150 million is certainly a good starting point. Feedback has shown that consumers want to utilize payments from their trusted financial institutions, especially one that provides them with a secure and easy way to pay, and once which will also deliver better business outcomes for merchants. So, it will be interesting to see how this new digital wallet develops and performs, and whether or not it really will pose a threat to its competitors.