Some of the most successful businesses in the financial space were actually developed by banks coming together and creating a solution to their own industry's needs. Another motive for these decisions is that these companies are wary of a competitive threat that could pose a long-term challenge to the underlying business.
Maybe the best example is Mastercard
Now, history seems to be repeating itself as The Wall Street Journal is reporting that several banks are coming together to work on a digital wallet that will link a users' debit, credit cards, and bank accounts in an effort to compete with financial apps like Apple's
In some ways, this seems to be the next evolution of Zelle which replicated the ease of transferring money in these apps. The same banks that developed Zelle which include Wells Fargo
What's interesting is that initially these financial apps were basically segregated from traditional banks. But, these apps are slowly adding additional features and functionalities and now have many of the same capabilities as a traditional bank account. Some examples include the ability to buy or sell crypto and stocks, transfer money, pay bills, take direct deposits, cash checks, using ATMs, debit cards, take out loans, etc.
And, many young people and teenagers are managing their entire financial lives through these apps, and they feel no need to be a part of the traditional banking universe. Obviously, if this trend continues, it poses a long-term issue for the traditional banking sector.
Therefore, this development is not surprising in the least. The only surprise is that these banks seem to be late to the party as these apps have already onboarded millions of users. Additionally, they have the built-in advantage of network effects. Not to mention that Apple Pay is well-integrated into the Apple ecosystem and easy to use for any iPhone user.
