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Apple vs. Banks: The Digital-Wallet War, Explained | WSJ

The Wall Street Journal

1.2M Views . 2023-03-29

Digital wallets like Apple Pay are continuing to grow in popularity. Banks are worried they’re losing ground to tech companies eager to gain market share in consumer payments. One of traditional finance’s biggest threats is Apple. Here’s how big banks are fighting back. 0:00 How digital wallets like Apple Pay work 0:43 How banks are competing against Apple Pay 3:45 Can banks succeed in creating their own digital wallets? News Explainers Some days the high-speed news cycle can bring more questions than answers. WSJ’s news explainers break down the day's biggest stories into bite-size pieces to help you make sense of the news. #ApplePay #DigitalWallet #WSJ

The popularity of digital wallets like Apple Pay is making banks nervous, as they are losing money and customer recognition to these tech giants. Apple Pay's dominance in the market comes from its integration with iPhones and its early adoption by banks, who saw it as a better alternative to being excluded altogether.

Apple Pay
digital wallets
banks
interchange fees

  • Apple Pay, while not the first digital wallet, gained popularity due to its integration with iPhones, which are prevalent in the US.
  • Banks initially agreed to pay Apple a fee for each Apple Pay transaction despite the loss in interchange fees, fearing that refusing could lead to Apple creating an alternative payment system that would exclude traditional banks.

Insights from the YouTube Video Script:

1. The Rise of Digital Wallets and the Threat to Traditional Banks: The script highlights how digital wallets like Apple Pay are rapidly gaining popularity, posing a significant threat to traditional banks. The script points out that these wallets are not only replacing physical cards but also cutting into banks' revenue streams through interchange fees.

2. Apple's Strategic Advantage: The iPhone Ecosystem and "Pay to Play" Model: Apple Pay's success is largely attributed to its deep integration with the iPhone ecosystem, making it the dominant payment option for iPhone users. Additionally, the script highlights the "pay to play" model where banks were incentivized to partner with Apple Pay due to

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