Banks Are Ceding Ground to Apple Pay

Alexander Silva is thinking less and less about his bank these days. He uses his Venmo app at least three times a month to pay his rent or reimburse a friend who picks up the check at dinner. “I’ll just Venmo them right then,” says the 25-year-old San Francisco photographer. He’s also been using Apple Pay in emergencies—like the time he paid for gas when he forgot his wallet on a road trip. “I think of it as I am using Apple Pay” rather than Bank of America, says Silva, who’s linked his account at the lender with Apple Pay.

That attitude concerns financial institutions, which believe mobile payment services such as Venmo and Apple Pay could erode loyalty, particularly among millennials, who surveys show are more prone to switching banks than their elders. “The biggest risk for them is their relationship with their customer,” says Zilvinas Bareisis, a senior analyst at Celent, a consulting firm. Surprisingly, most banks aren’t putting up much of a fight. Only 5 percent of U.S. banks Celent polled in November had a branded wallet app that works in stores for Android phones, and just 17 percent planned to release one in the coming 6 to 12 months. (Most third-party in-store wallets are incompatible with iPhones.)