Wall Street banks to muscle into digital payments

Digital Banking

Points for innovation, but too little too late?

Image source: Diego Thomazini / Shutterstock.com.

Fintechs could soon be facing some new competition on the payments front. Major US banks like JP Morgan, Wells Fargo and Bank of America, among others, are building a new digital wallet for consumers.

Here’s the rub: It sounds an awful lot like what fintechs are already doing. 

The banks are working on a digital wallet for e-commerce transactions that will be tied to a customer’s debit or credit card. The banks have already secured 150m Mastercard and Visa credit and debit cards for the wallet’s debut. Customers won’t have to enter those card details, a feature that has become synonymous with PayPal, Cash App, and Apple Pay, to name a few. Instead, an email address and mobile number at the till will suffice. 

Early Warning Services, a bank-owned entity that fancies itself a fintech company and runs P2P payments platform Zelle, is spearheading the initiative.

Other banks on the list include Capital One, PNC Financial, U.S. Bancorp and Truist Financial. Early Warning Services has selected James Anderson, a Mastercard alum, to lead the endeavour, according to the announcement.

While the banks get points for innovation, it’s unlikely fintechs are yet shaking in their boots. Major banks have a habit of swinging late. Consumers might glance their way but are unlikely to flee the fintech platforms that have introduced the convenience and speed that they have come to expect in the first place.

In addition, consumers have grown weary of exposing their financial details to multiple apps, yet another reason for them to quip, ‘thanks but no thanks’ to the banks. They prefer the country’s maiden super app, a title that’s likely to go to a fintech, not a bank. With Elon Musk in the running, banks don’t have much of a shot.

By the time the new digital wallet makes its debut later this year, online payments leaders are likely to have changed the game again with some shiny new feature, probably tied to crypto.

The consortium of banks have digital payments leaders PayPal and Apple Pay in their sights, whose dominance in the market has cramped their style. This is no doubt due in part to a collaboration between Apple and Goldman Sachs in which a savings account and BNPL offering are in the works.

Meanwhile, the IRS has made its intentions known for payments over $600 on Venmo and Paypal. Consumers will want to know whether the new digital wallet will have a similar target on its back.

The Wall Street wallet will be available to eligible US consumers whose accounts are in good standing.

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