The recent decision by Apple to grant third-party developers access to its NFC chip, along with Vipps MobilePay’s historic launch in Norway, has reignited discussions about the potential for banks to launch their own digital wallets.
Can banks succeed with their own digital wallets?
While the opportunity seems promising, industry experts remain sceptical about the likelihood of success for bank-led initiatives.
With global retail sales projected to hit $30 trillion by 2025 – 75% of which will still occur in physical stores – the competition for point-of-sale dominance is heating up.
Payments consultant Richard Crone predicts that banks will be tempted to create their own digital wallets, whether individually or collaboratively through platforms like Paze, a multi-bank wallet managed by Early Warning Services.
However, history has shown that banks often struggle in this space.
Past efforts to launch proprietary wallets have frequently faltered, and Crone believes the same fate awaits future attempts.
“It will be a fatal distraction for most banks, thinking they can create a wallet,” he warns.
Competing with Apple Pay and PayPal
Apple Pay currently dominates in-person digital payments, handling one in four retail transactions at the point of sale, while PayPal leads in the online space, engaging 40% of US consumers.
Both companies have expanded their reach, with Apple targeting online payments and PayPal venturing into in-store transactions.
For banks, the challenge lies in competing with these established players.
Peter Davey, a payments industry expert, notes that Apple Pay’s strength lies in its seamless integration with devices and its established user base.
“Consumers have already chosen how they want to pay,” he explains.
Why Digital Wallets Are a Tough Sell
Building a new payments brand is no small feat.
Forrester’s Lily Varón highlights that it can take years for a new wallet to gain traction, with few exceptions like buy now, pay later.
Even if banks incentivise users with cash-back bonuses, Davey believes this won’t sway younger consumers who prioritise ease of use over rewards.
“What’s going to prompt the consumer to make a wallet other than the Apple wallet their default?” asks payments expert Erin McCune.
She adds that multiple wallets could lead to consumer confusion, further diminishing the appeal of bank-branded solutions.
The Path Forward for Banks
While the allure of a proprietary wallet is strong, experts agree that banks would be better served by partnering with existing players rather than attempting to reinvent the wheel.
By leveraging platforms like Apple Pay or PayPal, banks can focus on enhancing user experience and driving adoption without the high costs and risks associated with launching standalone wallets.
In the battle for digital payment supremacy, it’s clear that collaboration, not competition, may offer banks the best path forward.
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