It’s no surprise or breaking news that mobile payment methods such as Apple Pay and Google Pay are becoming more relevant and popular, as cash payments have seen a rapid decline in popularity for at least the past decade. On top of that, the recent surge in bitcoin popularity spearheaded by billionaire entrepreneur Elon Musk has generated even more interest in using cryptocurrencies as a legitimate form of payment, lessening the desire for physical cash. The ongoing pandemic has accelerated the trend towards mobile payment methods even further, but this has massively cut into the profits of many large banking institutions in a number of ways.
One main way bank payments have been disrupted is the way in which cardholders are choosing to link their virtual wallets to their banks. Over a quarter of users across both Apple and Google Pay link their accounts with a debit or credit card that isn’t their primary bank provider, costing them the profits they collect from these transactions. It may not sound like a ton of people, but over the scale at which these companies do business is tens and tens of millions of users.
As mentioned briefly above, cryptocurrencies are becoming more widely accepted as payment from merchants and will soon take large slices of the pie of profits from commercial banks. Most people purchase cryptos on crypto specific exchanges such as Coinbase and Blockchain, and link those accounts to, once again, debit and credit cards different from their primary bank. Once these currencies are purchased, there is no place for the bank to collect profits and the consumer can either choose to hold onto the cryptos and hope they increase in value, as they most likely will due to their high volatility, or save them for an eventual purchase where they just sit in their exchange wallet.
One final way in which bank profits have been cut into as this popular digital age of payment leaves consumers with more places to store their money. Especially with new currencies and nearly every store now having a mobile app, consumers can choose to either purchase gift cards or leave remaining balances in their store wallet, such as Amazon, instead of transferring those funds back to their bank account. Since the banks have less money to work with in their customers’ accounts to generate more income, over a macro scale this has left quite a large dent.
It’s foolish to not see the future and potential with mobile payment options, as cash will continue this trend of declining popularity into the foreseeable future. This should serve as a reminder that banks and other institutions must constantly adapt in services they offer customers to remain competitive and turn larger profits.