Who needs a wallet anyway? That’s a relic that should be left in the days of Seinfeld buddy George Costanza.
Now, that’s a possibility, as Apple prepares to release its mobile payment service, set to hit the market in October as Apple Pay. The service has already drawn the attention of several major companies, including grocery stores and banks — such as Wells Fargo, which announced last week it had signed on with the computer giant to release the service to its customers.
But what does this mean for the banking industry? Is it a dangerous proposition to offer a product that could take customers another step away from brick-and-mortar banks? Insiders say that’s not a concern; the new service could actually strengthen a bank’s relationship with its customer.
Wells Fargo’s announcement is in tune with its reputation as an innovator of the banking industry, credited with being one of the first to lay the groundwork for Internet banking in 1995. Insiders say the move to partner with Apple was a long time in the making.
“We’ve been looking in the wallet space for a long time,” said Jim Smith, head of Virtual Channels for Wells Fargo. “The reality was [Apple] was the first one that brought enough and offered enough for our customers.”
And Wells Fargo is not alone. It is involved in a tight race to get customers to choose their cards over the competition’s. Apple has reportedly signed on with other big contenders — such as Bank of America, Citi, Capital One and American Express.
Here’s how it works:
Equipped with Apple Pay, customers can attach their bank or payment cards to their iPhone 6, iPhone 6 Plus and Apple Watch to pay for an item in person without swiping a physical card. This is possible anywhere a customer sees an Apple symbol displayed. The service extends to making purchases in apps offered by participating retailers.
At Wells Fargo, customers can connect their bank card to Apple Pay. Bank officials then monitor all transactions with sophisticated fraud detection systems. All purchases made by Wells Fargo customers are protected by a zero liability, a policy that reimburses victims of fraud if the unauthorized transactions are reported in timely fashion.
Smith, who has been working with Wells Fargo since the 1990s, said Apple Pay offers some of the strongest security measures available today. And that’s one reason why customers may feel more connected to their bank.
Another way bank officials say a service like Apple Pay could pay off in building a stronger business-client relationship is by generally making life a lot easier.
“It is our priority to offer innovative technologies to meet our customers where they are — and for many, that’s on a mobile device,” Smith said in a statement. “After all, a wallet may no longer be in your back pocket or purse — it’s in the palm of your hand alongside your GPS-enabled maps, camera, music, email, and social networks.”
The bank points to data showing that consumers are becoming more and more interested in mobile banking. The Federal Reserve released a recent survey showing 33 percent of mobile phone users and 51 percent of smartphone users say they use mobile banking.
Smith said mobile banking is Wells Fargo’s fastest growing sector, suggesting a service such as Apple Pay is anything but a threat — it’s a channel into the future. Almost gone are the days when you see people regularly going to the bank or grocery store to cash checks.
Balancing a checkbook may have been a once-a-week deal. Now, Smith said, you actually see customers managing their accounts more closely, checking their accounts multiple times a week — or day.
Today, more than 80 percent of consumers in the United States uses a mobile phone, with almost two-thirds of them connected to the Internet.
“Giving our customers the ability to make safe and secure payments when, where and how they want is a primary focus,” Smith said in a statement.
Going forward, Smith expects to see more mobile innovations popping up in the banking industry — because that’s what customers want.
“In the fall of next year, most merchants are going to have to support merchant terminals,” he said.