Though headquartered in San Fransisco, the city where tech start-ups reign supreme, Wells Fargo (NYSE: WFC) was founded 164 years ago. Originally in the stage coach business of the old American Wild West, Wells Fargo has grown to be one of the largest and most profitable banks in the United States. In a bid to ensure that it continue to remain relevant in the digital age the bank is entering the competitive market for mobile payments currently dominated by companies like Google(Nasdaq:GOOGL), Apple (NASDAQ: AAPL), PayPal (NASDAQ:PYPL), and Coin. While this move to enter mobile payments demonstares an interest in being versatile with technology that should make investors optimistic, it is unclear if Wells Fargo has the sophistication with mobile payment technology or will be able gain sufficient market share to make it a major player in the mobile payment market.
Mobile Payment technologies present one major advantage to consumers in the United States; because of more stringent security precautions taken by credit card companies which have made credit card scanners slower in processing payments, mobile payment technologies allow consumers to conduct transactions much more quickly. Mobile payment technologies though are not currently accepted at nearly as many retailers as credit cards are. Also market research shows that consumers are weary of doing banking with companies like Apple and Google which have a great technology brand but are less trusted with financial services. Half of consumers in a recent survey indicated they would rather use a mobile payment technology from their bank.
Wells Fargo in launching its mobile payment system this summer is seeking to leverage the value of their brand with consumers and their wide customer base to make significant inroads into the mobile payment market place currently dominated by tech companies. Well Fargo is a well respected brand with consumers-the American Consumer Satisfaction Index, which measures consumers sanctification with particular companies, indicated that Wells Fargo consumers were much more satisfied with the San Fransisco company than customers of other large banks. Wells Fargo also has the same advantage Apple had when it launched its mobile banking system: a large customer base. Wells Fargo has over 70 million customers globally, many of whom already have the already existing Wells Fargo app on their phones which allowed them to do mobile banking.
Despite all the things working to its advantage, Wells Fargo's mobile payment technology faces some serious limitations going forward. First, only Android users will be able to use it, meaning Wells Fargo will be competing directly with the already existing Android mobile payment system run by Google. Also Apple Pay, in addition to the 2 year head-start it has on Wells Fargo, has greater potential growth as there are more and younger I-phone users in the U.S. than Wells Fargo customers. Also, Wells Fargo is developing the technology in-house. This means Well Fargo is developing significant internal tech capabilities, which is a good sign for investors as it means Wells Fargo will remain competitive in the future. But the developer talent Wells Fargo is able to attract is obviously of lower quality than that of Apple and Google, meaning its mobile apps will probably be inferior. Investors should watch closely how Wells Fargo foray in the mobile payment market goes when accessing the value of the company.