As digital wallets gain popularity, a new conflict arises between Big Tech and banks over user recognition and trust.
After a years-long ramp-up, the use of digital wallets is now increasing, and a new conflict is emerging over which wallets users both recognize and trust with their payment credentials. Big Tech won because cellphones came with Google Pay and Apple Pay pre-installed. Banks are no longer content to feed Silicon Valley. In late January, Bank of America, Capital One, J.P. Morgan Chase & Co., PNC Financial Services, Truist, U.S. Bancorp, and Wells Fargo announced that Zelle owner Early Warning Services will administer their digital wallets.
According to Wally Mlynarski, Head of Product, Merchant Services at Bank of America (BofA), “with that program, I think merchants, consumers, and banks will all see a gain there, and create a better checkout experience for our clients.”
It is a big part of a developing mix of alternative payment methods and part of a larger discourse about digital wallets and which ones users trust and are familiar with (APMs). Mlynarski knows security and experience matter.
As fraud and bad customer experiences have plagued the online experience for so long, he said, “wallets can be there to promote a better experience for those customers.” He said, “That pain really starts to force people to look differently at how they check out.”
“One of the biggest fallacies is that digital wallets aren’t safe,” he added. EMV cryptograms and tokenization make digital wallets safe. Encryption and network tokenization prevent PANs from being stolen. He noted that trust is a major factor in consumer choice for online card not present (CNP) transactions and that PYMNTS research found that 55% of consumers do not retain their payment information with eCommerce businesses due to security concerns.
Confidence and familiarity
Digital wallet debates include customer experience, which may be as essential as security in determining how customers make purchases.
“We’ve seen the most logical source for a digital wallet, at least a consumer would say, is their bank,” Mlynarski added after citing a long list of APM providers, including Apple, Google, PayPal, Affirm, Sezzle, and in Europe, ways like Sofort and iDeal.
Who is accountable for my experience as a consumer and who bears the risk?, he inquired. “For this reason, banks and financial institutions keep coming up. We must continue doing that.
The addition of digital wallets as an Alternative to online checkouts is becoming increasingly obvious because merchants are in the front lines when it comes to the actual purchase, but there are some restrictions.
Businesses have been suffering from this for a while, according to Mlynarski, both from a card present and not present perspective. In terms of card present, I believe wallets have provided a solution and facilitated a quicker, more efficient checkout.
However, in order to counteract the NASCAR effect of too many logos crowding the checkout page, the digital wallet component must now be balanced with alternative payment options such as credit, debit, and buy now pay later (BNPL).
He asked if stores should focus on loyalty or other sales methods rather than supplying many digital wallets at checkout. “What actually generates better sales, promotes the conversion of that sale, and finally minimizes that security risk from a chargeback or a fraud is a very passionately guarded and disputed topic,” he said.
Depending on consumer preference
It will be interesting to see how this develops as the seven big banks’ EWS initiative competes with Google Pay, Apple Pay, the main card networks, and BNPL suppliers.
“The initial play is that banks have a right to offer a wallet for their users since people are turning to their banks to assist with this checkout experience problem,” Mlynarski said. BofA supports a diverse checkout strategy that prioritizes consumer preference because customers and the industry have different perspectives.
We aim to provide our customers with as many other payment options as possible, he said. That includes making payment methods like Apple Pay and Google Pay available, as well as international payment options like Sofort, iDEAL, Routepay, and other checkout processes that increase conversion rates for customers using our merchant side. It serves as a base.
In spite of this, he pointed out that more than 150 million cardholders have already effectively pre-registered for the next EWS wallet, which he believes can naturally drive customer checkout experiences without burdening retailers with an excessive number of expensive integrations.