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Banks want in on digital wallets — and the consumer data that comes with them

Stephanie Hughes Jan 23, 2023
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Banks are slated to unveil a new digital wallet later this year, aimed at competing with services like Apple Pay. Duane Prokop/Getty Images for MasterCard

Banks want in on digital wallets — and the consumer data that comes with them

Stephanie Hughes Jan 23, 2023
Heard on:
Banks are slated to unveil a new digital wallet later this year, aimed at competing with services like Apple Pay. Duane Prokop/Getty Images for MasterCard
HTML EMBED:
COPY

Later this year, seven of the country’s biggest banks — including Wells Fargo, JPMorgan Chase and Capital One — will be unveiling a new digital wallet, meant to compete with services like Apple Pay and PayPal.

The yet-to-be-named wallet will be used only for online transactions, at least to start. While it’s meant to drive revenue to the banks, it could also drive collection of consumer information.

Right now, if I were to buy something from Target using an existing digital wallet, my bank knows I spent $40.69, but not that I bought a bottle of sunscreen and size 13 toddler sneakers. 

“So, there’s a whole part of your life that the bank has basically just sort of give up over to these tech companies,” said Bill Maurer, who studies payments at the University of California, Irvine.

The new wallet could be a way for banks to get those details, Maurer said. “All of which can be leveraged to drive [you] toward higher-value products that they would offer, loans or whatever,” he said.

For example, people who are in the market for toddler sneakers may also be in the market for a house. 

The wallet will be managed by Early Warning Services, LLC, which is owned by several big banks and also runs the person-to-person payment app Zelle. 

When a consumer goes to buy something, they can enter the email address linked to their bank account, said Scott Talbott of the trade group Electronic Transactions Association. That pulls up all their payment info “and allow[s] the consumer to decide which one of their credit or debit cards they would like to use to make the purchase.”

According to a survey from the consulting firm McKinsey, 69% of American consumers use a digital wallet when shopping online. Marie-Claude Nadeau works in global payments there and said banks want both the revenue and the marketing that comes with those transactions. 

“Everyone wants a little piece of the pie, wants to make sure that consumers are engaged with their brands, not somebody else’s brand,” she said.

It’s possible that having more data might make it easier for Early Warning Services to detect fraud, because it’ll know if I suddenly start buying snowshoes instead of sunscreen. 

“So, if you’re the kind of consumer who freaks out a tiny, teeny little bit every time you click ‘buy now’ on some website, maybe you’ll have more peace of mind if you know you’re using something that is tied to your bank,” said UC Irvine’s Maurer. 

That said, it’s really hard to get people to change how they pay for things. You’ve got to make it more convenient — or give them a deal on toddler sneakers. 

Correction (Jan. 26, 2023): A previous version of this story incorrectly identified a tech company as one that tracks data on consumers purchases.

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