Customers should be able to use the new product to pay at online checkout with a wallet that is connected to their debit and credit cards.
Early Warning Services (EWS), a bank-owned company that runs the money-transfer service Zelle, will be in charge of managing the digital wallet. The wallet, whose name has not yet been decided, will remain independent from Zelle.
The finer details of the client experience are still being worked out by the banks. It will most likely require customers entering their email on a retailer's checkout page. The retailer would send a ping to EWS, which would then use its connections to the banks on the back end to determine which of the customer's cards could be added to the wallet. Then, customers could decide which card to use or not.
The new offering will be introduced by EWS in the second half of 2023. When the wallet launches, the banks anticipate 150 million debit and credit cards to be supported. Customers from the US who have paid their bills on time, used their card online recently, and provided an email address and phone number are eligible.
Since US people are accustomed to using cards when they shop, the wallet is being designed to be compatible with them. It would boost the likelihood that more individuals would use the wallet, according to the banks. If a significant number of retailers activate the wallet and customers use it, EWS banks may consider including additional payment methods. That might entail allowing bank accounts to be used for direct payments.
Debit and credit cards from Visa and Mastercard will be available when the wallet launches. EWS contacted Discover Financial Services and other card networks about the project to see if they would be interested in allowing their cards to be stored onto the wallet.
Getting suppliers to incorporate yet another checkout option on their websites would be the biggest challenge for the banks and EWS. However, if they are successful, large banks and payment networks like Visa might claw back some of the profits that tech companies are taking from them, particularly Apple, which is said to have a monopoly on tap-to-pay services.
The news comes after the most recent large bank earnings season. Earnings at the major banks have increased as a result of the Federal Reserve's aggressive interest rate rises, but challenges are getting worse. The Federal Reserve is putting the brakes on rate increases because higher rates are causing larger loan loss provisions, which may hurt earnings in upcoming quarters.
The banks that own EWS are attempting to reduce fraud. Customers that use wallets would avoid having to manually type their card details, which increases the possibility of fraud and payment rejections that result in missed purchases.Owners of EWS discussed allowing customers to utilise Zelle for online purchases in 2023. The decision to forego moving further was influenced by worries about fraud and how disputed transactions are handled, both of which have attracted the attention of politicians.
One goal of the new service is to compete with third-party wallet operators such as PayPal and Apple Pay. Banks are worried about losing control of their customer relationships. Apple, in particular, poses a big threat. The tech giant has moved further into financial services and is working on a savings account with Goldman Sachs and a Buy Now, Pay Later (BNPL) offering.
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