The Competition intensifies in the Digital Wallet Arena with the Entry of Major Banks

Technology giants like Apple and Google have spearheaded the development of digital wallets, violating upon the traditional domain of banks and posing a challenge to their customer base. In response, a consortium of banks including Bank of America, Wells Fargo, and Chase have announced plans to launch their digital wallet programme, as reported by the WSJ.

This digital wallet initiative aims to simplify the payment process for customers using Visa and Mastercard-branded cards by allowing them to securely store their card information without the need for manual input during transactions. Early Warning Services, the entity behind Zelle, will oversee the management of this new digital wallet, although it will operate independently from Zelle.

Christopher Miller, Head of Emerging Technologies at Javelin Strategy, expressed scepticism about the prospects of this new entrant, citing a crowded market and potential challenges in gaining consumer adoption. While Early Warning Services may leverage existing consumer relationships to raise awareness and secure merchant partnerships, the appeal of the proposition remains unclear at present.

Although digital wallet adoption has been gradual among consumers, there has been a notable burst amidst the pandemic. Broadly, digital wallets fall into two categories: those tied to specific device manufacturers and those compatible with any device. Examples of the former include ApplePay, GooglePay, and SamsungPay, while OS-agnostic options encompass PayPal, Square, and CashApp.

These digital wallet platforms are expanding their financial ecosystems by introducing features like cryptocurrency trading and Buy Now, Pay Later (BNPL) options to incentivise customer migration. Square's acquisition of BNPL company Afterpay, PayPal's introduction of cryptocurrency trading, and ApplePay's collaboration with Goldman Sachs to offer a savings account are indicative of this trend.