Challenging Apple Pay
The chain of banks behind Zelle — which is owned by seven banks total, including Chase (JPM) and Bank of America (BAC) — are planning to launch their own digital wallet. This wallet will jump into the increasingly-crowded field of digital wallets, dominated by the likes of Apple Pay (AAPL) and PayPal (PYPL).
For the tech companies that have so far led the market, this may be unwelcome news. But for consumers, it should end up being a good thing. Increased competition tends to result in more options and innovation, such as smoother checkout processes and increased security.
Cash, Credit, or App?
Digital payment options have also experienced a huge spike in usage since the pandemic, when consumers opted away from bacteria-ridden cash.
There are dozens of ways for consumers to buy goods digitally, including P2P apps like Zelle or Venmo, digital wallets like Apple Pay, and even Buy Now, Pay Later services like Affirm (AFRM) or Klarna.
The majority of Americans show a preference for digital payment options, with over 64% of the population using peer-to-peer payment apps such as CashApp (SQ) or the PayPal-owned Venmo. For younger adults, that number is up to 81%.
Protecting Your (Digital) Wallet
A collective of major trade associations found that over the past 5 years, 99.9% of the 5 billion transactions on Zelle went smoothly, with no report of fraud or scams. But that number may be misleading — mathematically, it means there were also 5 million instances of fraud during this time period.
While using digital payment options can be incredibly convenient, it’s still important to take measures to protect yourself,.
The easiest way to do so currently is by doing a test run before sending a large sum of money. In other words, send $1 to the receiver first to ensure that you are sending to the right address. Once they confirm that they’ve received the money, you can go ahead and send the full amount.
Sound slightly inconvenient? It may be. But ironically enough, these are the tradeoffs we must make in the name of innovative convenience.
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