As these payment apps and services grow in number and use, banks could lose out on billions in transactions.
Consumers worldwide are increasingly using digital wallets to complete transactions both online and while in-store shopping, which means that banks stand to lose out on billions in transactions that would traditionally have belonged to them.
What has yet to be seen is if those banks will pivot to keep up with their primary online competition.
As digital wallets such as PayPal, Apple, and others are adopted at a rapid rate in countries around the world, banks have yet to prove that they will be able to keep up with this trend in shopping transactions. If they do not, said a recent Accenture report, it will be costly for them.
Beyond in-store purchases and online shopping, other areas where banks stand to lose out to fintech competition includes next-generation transactions such as account-to-account transfers. These trends also stand to be challenging for credit card companies and other forms of traditional financial institution.
It took a while for digital wallets to take off in the United States, but the pandemic drove their use upward.
The contactless trends that took off during the pandemic led to the rapid growth of mobile payments during online commerce and in-store shopping. This included markets such as the US, where adoption had previously been slow.
According to the Accenture consulting firm study, consumer payment preferences will shift as much as $31.4 billion in revenues away from US banks in the years from 2023 through 2026. In order to sidestep losing that revenue, the report indicated that banks will be required to look into newer payment channels with greater purpose. Otherwise, they will need to develop additional competitive strategies to overcome the rising consumer trend away from their products.
The report, which was titled “Payments Get Personal,” cautioned that card-issuing banks that were too hesitant would end up handing over tremendous volume to big tech and fintechs on the rise.
“Banks that rethink their strategies, and capitalize on consumers’ trust in their stability and security, could expand revenues and market share,” said the Accenture digital wallets report.
