Mobile payment providers making inroads into the banking space

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Mobile payment providers are making inroads into the banking system, offering innovating and convenient banking products and services in partnership with traditional banks. The growing demand for mobile-first banking has created opportunity for fintech giants to develop smart debit and credit cards that can be connected to the mobile wallet app. Smart checking accounts and digital ATM networks are some of the other banking features trending across the mobile payment ecosystem.

Millennials and Generation Z, the digital pioneers, are reshaping the banking expectation driving more fintechs to enter the banking arena. Making up 32% of the global population in 2019, the generation Z demands revamping of the traditional banking and outdated processes and are exploring new digital avenues for convenient and efficient banking experience. Fintechs are futuristic in rolling out new banking products and services, primarily targeting the Generation Z to cater to their increasing spending power.

Mobile payment providers are competing in the banking space with neo banks such as NuBank, Revolut, N26 and Monzo as direct competitors.  Venturing into banking arena is part of the holistic goal of mobile payment providers to step up their business beyond payments and establish their market position as financial service provider.

Google for instance is planning to fortify its payments business by developing its own physical and virtual debit card. The card will be issued in collaboration with different credit unions and banks including Stanford Federal Credit Union and CITI. Google card is expected to be first launched in the US market.  The co-branded card will allow users to make both online and offline payments for purchase of products and services. Users will also be able to keep watch on their purchases, check balances and lock their accounts by conveniently connecting the card to the Google Pay app.

Currently, Google app can only be connected to traditionally bank issued payment cards for making online and P2P payments. The launch of Google Card will enhance the potential growth of Google as a fintech on account of probable expansion of use case of the Google Pay app. The launch of smart debit cards will open up new revenue streams for the fintech. The company can, in partnership with other banks, charge an interchange fees for making payments for purchases using the Google card. Depending on privacy policy framework of the card, Google could also use and sell the transaction data of user’s purchases for creating more appealing ads for sales lift.  

Earlier, Apple launched Apple Card, a smart credit Card that seamlessly works with Apple Pay on the iPhone in August 2019. Google, being the most downloaded digital payment app across the world according to the Sensor Tower’s Store Intelligence platform, it is expected to entice a larger user base for the new offering.  

Similarly, PhonePe launched its digital ATM service in January 2020. PhonePe ATM will facilitate easy cash withdrawals from the merchant partners of PhonePe. The new feature will allow easy availability of cash for users who withdraw cash from neighborhood stores and also relieves merchants from the need of storing cash or making trips to banks for deposition of extra cash. Users can withdraw upto INR 1,000 in a day from the merchants offering the facility. After the pilot run in the Delhi-NCR region, the new feature is currently being rolled out in 300 cities with withdrawal points across five lakh shops. The mobile payment provider plans to expand the network to more than 2 million ATM’s by end of 2020.

 In the highly competitive landscape of digital payment space in India, innovative services facilitating convenience is the key to sustain their market share. The digital ATM network via merchants, first-of-its-kind service in India, can prove to be an uphill battle for its rivals including PayTM, Amazon Pay and Google Pay.

Samsung launched Samsung Pay Debit Card in partnership with fintech SoFi and global financial services company Mastercard in May 2020. The new feature on Samsung pay will be inclusive of the cash management account by SoFi, a debit Mastercard and additional benefits for users. 

The widespread customer reach of mobile payment providers is a plus for flourishing their banking venture. The massive user base, mainly comprising of millennials and Generation Z users, present an arranged stage for launch of innovative banking products and services. The shift towards mobile and digital banking is expected to further ramp up over the coming years owing to the pandemic and rising of the generation Z consumers. Speed, convenience and contactless feature will continue to entice the new generation towards digital, mobile-first and app-based banks.