Tech companies, including Apple and Google, have taken the lead in developing digital wallets, challenging banks’ traditional turf and threatening their customer relationships. As a result, a group of banks including Bank of America, Wells Fargo, and Chase are teaming up to create a digital wallet program of their own, according to the WSJ.
The wallet will allow customers with Visa and Mastercard-branded cards store their information in the digital wallet without having to type it in when making a purchase. It will be managed by Early Warning Services, the same company that manages Zelle—although it will be separate from Zelle.
“This new entry, if it actually launches, would enter a crowded market and have a difficult road to consumer adoption,” said Christopher Miller, Head of Emerging Technologies at Javelin Strategy, in a recent report. “EWS may be able to leverage some existing relationships with consumers to drive awareness and merchants to gain online checkout placement, but based on what we know at present, it’s not clear why the proposition would be compelling.”
Currently, digital wallets have been adopted slowly by consumers though there was an increase amid the pandemic. There generally two kinds of digital wallets—those associated with a specific device manufacturer, and those that can be used by any device. “The ones that are essentially embedded in your mobile device are ApplePay, GooglePay, and SamsungPay,” said Miller. “The operating system (OS) agnostic ones include PayPal, Square, and CashApp.”
All of these wallets are trying to build out their own financial ecosystems. Companies who are looking to incentivize customers to switch to digital wallets are adding features such as crypto trading, Buy Now, Pay Later (BNPL) options, among other enticing features. For example, Square purchased a BNPL company, Afterpay; Pay Pal added cryptocurrency trading options; and ApplePay is adding a savings account option through Goldman Sachs.