Big banks are preparing to compete with Big Tech for digital wallets

A gang of big banks including Wells Fargo, Bank of America and JPMorgan Chase are reportedly preparing to launch a digital wallet product that aims to compete with those offered by tech heavyweights Apple, Google and PayPal.

The bank wallet, being developed by Early Warning Services (EWS), a bank-owned company that operates the cell money transfer service, would link to a consumer’s debit and credit cards and allow them to shop more easily at online retailers. The Wall Street Journal reported Monday.

Other banks in the venture include Capital One, PNC Financial Services, US Bancorp and Truist Financial Corp.

“The motivation here is to try to slow Apple and Google’s growth in financial transactions,” said Ross Rubin, senior analyst at Reticle Research, a New York City-based consumer technology consulting firm.

“Banks want to reclaim the portion of the transaction that Apple receives when a credit card is used with Apple Pay,” Rubin told the E-Commerce Times.

competition in the financial services sector

According to the Journal, banks fear losing control of their customer base and see Apple in particular as a significant threat, particularly with the reported switch to savings accounts at Goldman Sachs and a potential buy-now-pay-later proposition.

“Financial services are all threatened by digital wallets. That’s why Goldman Sachs has partnered with Apple to stay ahead of the competition,” Tim Bajarin, president of Creative Strategies, a technology consulting firm in San Jose, California, told the E-Commerce Times.

Operating in a highly competitive environment, financial services companies are no doubt aware of the growing aggressiveness of Apple and PayPal, added Mark N. Vena, president and principal analyst at SmartTech Research in San Jose, California.

“Apple and PayPal have largely focused on consumer and small business transactions, while the legacy financial services companies have focused on large organizations, corporate transactions and mortgages,” Vena told the E-Commerce Times.

“As Apple and PayPal start exploring these areas, you’re going to see increased activity from legacy financial services companies trying to ‘cut the passport off.'”

Banks need to overcome consumer inertia

The Journal noted that banks expect 150 million debit and credit cards will be eligible for use with the new wallet when it is launched. Any US consumer with current payments on their card, who has used their card online, and who provides an email address and phone number is eligible to participate in the program.


While user interface details are still being worked out, the journal explained, the wallet will likely involve entering an email address on a merchant’s checkout page, using EWS’ backend connections to banks to process the credit card of a shopper into their wallet and the shopper selects which card they want to use to make a payment.

Although integration with banks will be good for the wallet, it will take more than that to attract customers.

“To drive adoption, banks need to do something that gives consumers value to make the switch,” noted Dayna Robyn Radbill, senior research director at Gartner.

Merely registering consumers for the wallet program will not make it a success, she added. “It needs to be more than just registration – which they can potentially achieve if someone opens a bank account – but actual usage, because right now consumers’ needs are pretty well served by their existing plastic cards or the mobile wallets that are already out there.” ‘ Radbill told the E-Commerce Times.

“Consumers are creatures of habit,” she added. “The greatest thing to overcome is indolence. It takes far more to get a consumer to change their behavior when their needs are already being met than when there is a gap in their current experience.”

Rough road for newbies

Even if banks are successful in registering wallets, they still need to provide persuasive arguments to merchants, Radbill continued.

“That will likely require some technical investment on the part of the retailer,” she said. “So the retailer has to be convinced that there’s something for them.”

“Typically they want to see a huge consumer base using and demanding a particular wallet,” she explained. “The challenge will be not just getting consumers to use it, but also getting merchants to sign up for it.”

Bajarin noted that launching a bank wallet is less about gaining an advantage through digital innovation and more about staying competitive and maintaining service fees for banks.

“PayPal, Apple Pay and Android payment services have a big lead in digital wallets,” he said. “The challenge for banks will be to market this to their own customers and convince them to use their service over competitors.”


Vena pointed out that there are high hurdles to breaking into the digital wallet space as a newcomer.

“The space is already crowded and it’s getting harder and harder to tell surfaces apart,” he told the E-Commerce Times.

“Newcomers must have massive capitalization to enter the market – which often requires a partnership with an established bank or financial institution – and fee competitiveness makes it difficult to generate reasonable profitability,” he continued.

“The field is so packed with big names like Apple, Google, Venmo, PayPal and others,” he added, “that it’s very difficult for a newcomer to clearly articulate a compelling, differentiated value proposition against the established players.”

Presence on the home screen

Rubin argued that consumers don’t need multiple digital wallets.

“On a phone, one is provided by default by the OS vendor,” he explained. “Other providers have wallets, but they don’t have the integration with contactless payments that Apple and Google have.”

Banks could potentially strike a deal with a phone maker to get some visibility on a home screen, he noted. “With Samsung phones, you can pay with Google or Samsung, but it would be more difficult with Apple because the platform is more closed to things like that,” he said.

“However,” Rubin added, “there has been regulatory pressure on Apple to open up its ecosystem. If this new initiative could take off, perhaps banks could advocate for consumers to be able to vote in digital wallets to pay for things on Apple phones.”

Vena noted that because of the close relationships these companies have with their customers, it will be difficult for banks to compete against technology companies for the hearts and minds of consumers.

“This is especially true for Apple because of their business model,” he said. “Because of this reality, several financial services companies have chosen to partner with companies like Apple because they understand the strength of Apple’s brand and customer relationships.”