Big banks planning new digital wallet

A group of big banks reportedly has begun work on a new mobile wallet to compete with the likes of PayPal and Venmo. The Wall Street Journal reported that Bank of America, JPMorgan Chase, Wells Fargo and four other banks are developing a digital wallet that online shoppers can link with their debit and credit cards.

The as-yet unnamed digital wallet will be managed by Early Warning Services LLC, the bank-own technology firm that already operates the Zelle person-to-person payment network, the Wall Street Journal reported.

Meanwhile, a report released Jan. 24 found that a significant number of Americans prefer plastic cards to digital wallets. About half of consumers surveyed last fall by J.D. Power (48 percent) said physical credit and debit cards are easier to use than wallet apps on their smartphones.

Rollout planned for this year

Early Warning—which is owned by Capital One, PNC Bank, Truist and U.S. Bank, in addition to BofA, Chase and Wells—is said to be readying the new digital wallet for rollout during the second half of this year. The initiative differs from Zelle, which is strictly for person-to-person payments and is expected to operate as a separate network built on the Visa and Mastercard infrastructure.

Money transferred via Zelle is limited to funds on deposit at financial institutions. The owners were said to have been wary of expanding that network into ecommerce transactions because of concerns about fraud and disputed transactions. No details are available on how EWS and its owner banks plan to deal with these issues with the new initiative. However, EWS has an extensive portfolio of fraud and risk management tools, such as real-time account validation and owner authentication.

The initiative is seen as an effort by big banks to compete with PayPal and its Venmo unit for online payment activity. Unlike Zelle, PayPal and Venmo allow users to access both card and bank account balances.

PayPal ranks as the largest online payment processor in the world with a whopping 43 percent market share, according to the research firm GlobalData. In 2021, PayPal handled 19.3 billion payment transactions worldwide.

In-store mobile wallet usage stalls

Digital wallets have come a long way since Elon Musk and partners introduced the world to PayPal in the late 1990s. By 2022, PayPal had amassed 429 active users, worldwide, who made payments totaling $1.25 trillion.

Today, the terms "digital wallet" and "mobile wallet" often get used interchangeably. Grandview Research predicted that the mobile wallet market in the United States will grow at a compound annual rate of 26.7 percent between now and 2030. That is if Americans can be weaned from plastic cards.

According to J.D. Power's research, mobile wallet usage among Americans is growing, and to a lesser extent, so, too, is the share of consumers who say it's easier to pay using a plastic card. The percentage of surveyed Americans who had used a mobile wallet rose to 49 percent last year from 38 percent in 2021, J.D. Power reported. The percentage who said they had heard of mobile wallets but never set one up fell to 24 percent in 2022 from 37 percent in 2021. "Usability continues to be an issue holding back wide-spread adoption of mobile wallets," J.D. Power wrote in a report. The share of consumers who said they find mobile wallets less convenient than plastic cards rose to 49 percent from 47 percent. "One potential reason for this rise? The emergence of contactless cards," the company offered in its January 2023 Banking and Payments Intelligence Report.

"Changing customer behavior is one of the hardest goals for a company to realize, and much to the chagrin of some mobile wallet providers, the ubiquity of smartphone use hasn't quite translated into automatic adoption of mobile wallets yet," the report stated. And, that could bode well for legacy players. "While mobile certainly holds some allure, contactless cards can keep the tech giants' efforts to co-opt the American payment landscape at bay," the report concluded.

Whether you want to upgrade your POS offerings, find a payment gateway partner, bone up on fintech regs or PCI requirements, find an upcoming trade show, read about faster payments, or discover the latest innovations in merchant acquiring, The Green Sheet is the resource for you. Since 1983, we've helped empower and connect payments professionals, starting with the merchant level salespeople who bring tailored payment acceptance and digital commerce tools, along with a host of other business services to merchants across the globe. The Green Sheet Inc. is also a proud affiliate of Bankcard Life, a premier community that provides industry-leading training and resources for payment professionals.

Notice to readers: These are archived articles. Contact information, links and other details may be out of date. We regret any inconvenience.