The mobile wallet has become a major battleground between large banks and Big Tech, with Apple Pay emerging as a dominant force. In response, America's largest banks, including JPMorgan Chase, Bank of America, and Wells Fargo, are set to launch Paze, a mobile wallet that will connect directly to the credit and debit card accounts of 150 million customers next year. Paze will be operated by Early Warning Services, the same consortium behind the successful Zelle payment app, which processed $629 billion last year compared to Venmo's $244 billion.
Banks are increasingly turning to partnerships, either collectively or with tech firms, to counter the advancements of companies like Apple, Google, and X (formerly Twitter) in offering banking services. For instance, JPMorgan has struck deals with Amazon and Apple, and Citi provides financing for Amazon's installment payments. This shift marks a change from a few years ago when big banks attempted to compete independently. A recent survey found that 65% of banks and credit unions had partnered with at least one fintech in the past three years.
While Apple Pay does not release official usage statistics, market researchers indicate it accounts for only 6% of global purchases. However, its user base has rapidly grown from 60 million five years ago to over 500 million, making banks nervous. Apple has also expanded into financial services with products like Apple Pay Later, which it funds itself, and a high-interest savings account in partnership with Goldman Sachs. Consultants believe for Paze to be successful, banks must allow it to connect directly to customer bank accounts, giving it an advantage over Apple Pay, which does not hold funds. However, some industry watchers are skeptical, given the widespread adoption and ease of use of Apple Pay.
These partnerships are attracting more regulatory scrutiny, with concerns that such tie-ups could expose banks and the U.S. banking system to bad actors. Michele Alt, a bank consultant, notes that regulators expect banks to know their customers, which becomes more complex when working through fintechs. Anecdotal evidence suggests increased examination of these partnerships by regulators.
Despite the challenges, banks see partnerships as crucial. Cameron Fowler, a top executive from BMO Financial Group, has been recruited to lead Early Warning, the group behind Paze, indicating the banks' commitment to this initiative. However, little information has been released about Paze's functionality, or whether users will be able to access account information through the app.
