According to reports, several large banks behind Zelle are now teaming up to create their digital wallet. The digital wallet will compete with PayPal and Apple Pay. The step is seen as an effort to slow Apple’s push in consumer financial services.
The senior industry analyst at Bankrate, Ted Rossman, said that banks’ big challenge is providing something unique to grab attention and convince people to use the solution rather than other established services like PayPal and Apple Pay.
What it means for consumers
Rossman further said that it is an easier online checkout experience for consumers. This is because customers will not need to enter all their card information. After all, it will already be saved in the system. And it will be highly managed by the banks. Thus, it will have better fraud protection than retailers. Rossman also said that this online solution would likely have a sort of 2-factor authentication. For example, a code is sent via text message.
The World Privacy Forum executive director, Pam Dixon, said that consumers should still be careful because it is their financial information.
Growing Digital Wallet Usage
Today, 64 percent of Americans use peer-to-peer payment apps. And, for adults, it jumps to 81 percent, according to Consumer Reports of March 2022. About 40 percent of the 2,000 people who were polled said that they use payment apps at least one time a month, and 18 percent use them at least one time a week.
The customers should be aware
Zelle was the subject of recent criticism. The U.S. Senate report states that Zelle is rampant with fraud, and few customers are getting refunded, which violates federal laws and consumer rules.
The Consumer Reports analysis asked policymakers to strengthen consumer protections.
However, the Bank Policy Institute, American Bankers Association, the Clearing House, and Consumer Bankers Association said that 99.9 percent of the 5 billion transactions processed on the Zelle network in the past five years were without any fraud report. Plus, if a customer disputes a transaction made via Zelle, then banks are obligated by federal law to investigate and provide the reimbursement in case the transaction was unauthorized.
Further PYMNTS’ research has shown that digital wallets have been growing. And, so, the banks are bringing several new efforts to create a new digital wallet for payments. In the process, this can prove a competition with Apple Pay and PayPal.
Eight years after its debut, Apple Pay captured 2.4 percent of in-store transactions. More recently, data show that Apple Pay was used in 12.7 percent of online transactions.
PayPal is the oldest digital wallet. It showed in its recent results that its active accounts continue to grow. However, where it stood in the double digits, it now stands at 4 percent, as per the latest quarter.
However, it is yet to be seen when the banks will come to the market with their digital wallets. So, the battle may be joined later in the year.
