Banks behind Zelle to develop digital wallet to compete with PayPal, Apple (updated)

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The banks that are behind peer payment app Zelle are now developing a digital wallet to compete with the liked of PayPal and Apple Pay, the Wall Street Journal reported Monday, citing people familiar with the plan.

JPMorgan Chase (NYSE:JPM), Wells Fargo (NYSE:WFC), Bank of America (NYSE:BAC) and four other banks that make up Early Warning Services (EWS), which operates Zelle, plan to introduce a wallet liked to the users' debit and credit cards that shoppers can use to pay at merchants' online checkout. EWS will manage the wallet.

The wallet would compete with PayPal Holdings (NASDAQ:PYPL) and Apple's (NASDAQ:AAPL) Apple Pay, the WSJ said, citing people familiar with the matter. Apple, in particular, has been pushing further into financial services and has been working with Goldman Sachs (NYSE:GS) on a saving account and a Buy Now, Pay Later product, the article said.

In addition, it could help cut down on fraud, since customers using the wallet don't type in card numbers, which can increase the risk of fraud and rejected payments, and with it lost sales.

Update at 1:04 PM ET: An EWS spokesperson responded to Seeking Alpha that the new wallet for consumers, merchants, and financial institutions will launch this year. Updates on the product will be posted on EWS's blog on Tuesday.

In November, the WSJ reported that the banks that own Zelle were in talks for a plan to refund customer users who were scammed into sending payments.

The other banks that own Zelle are: Capital One Financial (NYSE:COF), PNC Financial (NYSE:PNC), Truist Financial (NYSE:TFC), and U.S. Bancorp (NYSE:USB).

In December, JPMorgan (JPM) closed on the acquisition of European payments company Viva Wallet.