Financial technology (Fintech) has seen huge overhauls in the recent past. Payment processing in particular has been hit with new disruptive technologies, all threatening the livelihood of incumbent financial institutions such as banks.
You might have heard of peer-to-peer lending, smart contracts, and digital currencies – these are just some of the cutting edge technologies that will shape the payment processing landscape in the very near future.
Paypal-owned Venmo is a peer-to-peer mobile payment service that has been gaining traction worldwide. With so much processing power packed into consumer’s mobile phones, and quantum leaps in encryption technology, mobile payments have become a popular alternative to bank transfers.
But the war is not over. In response, US banks have launched the Zelle app, which is designed to revolutionize the way people transfer money to each other.
In this article, we dive into some of the reasons US banks have deployed their own apps to fight the inevitable wave of new payment processing technologies. In particular, we will be looking at Zelle, which was introduced as recently as 2011.
It’s simply necessary
Incumbents must combat competitors to survive, and adopting similar technologies is simply a necessary step.
Banks are clearly aware of the popularity of Venmo, as well as its potential to become a major method of online payment. It makes sense that they want to launch their own version to both keep up with and get ahead of emerging competitors, which could be perceived as a threat to their current and future trade.
Zelle will no doubt prove to be popular amongst banking customers, and it could revolutionise the world of finance further. Traders who trade online using brokers such as ETX, for example, will now be able to transfer funds between the different bank accounts they use instantaneously.
If you can’t beat ’em, join ’em
Banks are quickly realizing that new technologies have their strengths – adopting the latest tech will make payment processing easier for customers
The fact that the money is transferred immediately is just one of the main strengths of the app, as other methods take more time, including Venmo. The banks are also working in unity in order to allow their customers the means to transfer money to customers from a variety of different banks.
Having happy customers will boost their reputation and encourage more people to use their service. Less people will be inclined to search for alternatives to bank transfers, such as Venmo, and money transfers will be even smoother and more efficient.
It’s an investment in the future
Adoption of new payment processing technologies has been relatively quick, but the boom is yet to be. Some observers have predicted that fintech like smart contracts have the potential for rapid adoption, much like TCP/IP adoption back in the heyday of the internet.
Zelle is already doing well, having reached an aggregate transaction volume of $55bn last year alone. It is a clear indication that banks want to keep up to date with payment technology, and are investing in their own future as well as the future of digital technology.
The app also saves a lot of money in handling costs for each bank, as use of paper money and cheques is likely to decrease. They could even open the app up to interested businesses which also want to reduce their overall handling costs and paperwork. Mobile Apps are helping businesses become more frugal and time conscious due to the elementary service they offer on a day to day basis. The banking sector and finance quarter will be looking to continue their advancements of app interest to continue bringing in new customer, setting new payment leaderships and invest in companies who are digital road runners.
Where are the banks headed?
With so much new technology out there, the future of banks are still uncertain. However, they do deserve their due credit.
Banks are clearly stepping up their game in order to keep up with the rate of progress in the digital and technological world. With so many apps coming out to aid all things finance, there are likely to be more innovations to come which revolutionize the way people transfer money. It is likely the world will see mobile apps at the forefront of everything we do in the near future, a world which the corporate world is already heading towards