The news: Bank of America, JPMorgan, and several other large banks will launch a digital wallet later this year that links to debit and credit cards, per the Wall Street Journal.
Why make a wallet? The banks have two main objectives:
1. Tighten customer relationships. The online wallet will compete with third-party wallets like Apple Pay and PayPal, people familiar with the matter told the Journal. These wallets are gaining checkout power—and banks fear that this may wear away at their customer relationships by decreasing card visibility. Almost half of US digital buyers used PayPal to make a digital purchase last month, per Bizrate Insights. Introducing a bank-branded wallet might help card issuers curb third-party wallet dominance.
2. Decrease online fraud. Card-not-present (CNP) fraud has steadily increased, and banks hope that letting customers check out without inputting card details will help minimize fraud. CNP fraud losses grew 11.3% year over year (YoY) in 2022, totaling $8.75 billion, per our forecasts. Losses are expected to grow 8.5% and reach nearly $9.49 billion this year. The wallet could help reduce issuers’ fraud liability, which could grow alongside ecommerce’s rise.
And while it wasn’t one of the banks’ explicitly stated goals, the digital wallet could also give banks the added benefit of gaining a larger slice of ecommerce spending, which is expected to hit $1.163 trillion in the US this year, per Insider Intelligence forecasts.
What’s the catch? Merchant and customer uptake isn’t certain.
Related content: Check out what our Banking Innovation analysts have to say about the upcoming wallet launch.
This article originally appeared in Insider Intelligence's Payments Innovation Briefing—a daily recap of top stories reshaping the payments industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.
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