Has PayPal Accelerated The Shift Away From Traditional Banks?

Ryan Thompson November 14, 2019 0

One of the biggest shake-ups of the financial industry in the last ten years
has been the growth of digital banking from challenger banks in a sector widely
dubbed “FinTech”. The move away from traditional banks has seen US
digital bank Chime and the UK’s Monzo make huge strides into the banking
market.

But was it the widescale acceptance of eWallets like PayPal that paved
the way for this new era of banking?

Source: Pixabay

Speedier
transactions make eWallets and digital banks a preferred choice

With the explosion of smartphones came online payment apps, which were able
to seamlessly integrate with bank accounts in transferring and paying for
purchases online. The widescale adoption of eWallets, principally in the form
of PayPal for new retail purposes like eBay and Amazon meant that it was the
payment form of choice for an entirely new generation of online shoppers. 

PayPal went from strength to strength partnering with millions of shops and
stores to provide easier, fluid and wholly trackable customer payments. It
followed in gaming too as casinos that accept PayPal made it easier for players
to deposit and transfer online payments. The payment system made it so players
can make and recieve payments safely and securely when they play online casino at Betfair, for
example. The benefits of using PayPal in retail situations, is that it
only takes a few clicks and money can be deposited from and back into it. This
speedy transaction service compares more favourably than waiting up to five
days for credit cards to process payments which means, in this instance, games
deposits process and activate almost instantly.

Source: Pexels

It is one of the main reasons why digital bank Monese has partnered with
PayPal in an attempt to broaden its customer base outside of the UK. The
eWallet functionality will help its customers manage their money from within
PayPal.

A decade that has
shifted toward 100 percent digital banking

Companies like Monese
represent the shift
towards challenger banks that has been taking place
since TSB, Virgin Money and Metro Bank entered the market at the beginning of
the decade. Since then there has been a steady shift towards 100 percent
digital banks like Revolut, Monzo and Triodos. They work entirely online, which
is much the same as most people use their banks now anyway.

Some of the benefits of this digital challenger bank model include being able
to transfer and spend money around the world essentially fee free, other than
the what the exchange rate happens to be. Many of these banks tend to keep
their attention solely on online products, and having no bricks and mortar
branches means every transaction is completed through its app contributing to
lower running costs that can mean better rates for savers and customers.

Source: Pixabay

What is obviously a bonus for these banks is that most have entered the market
after the financial crisis caused by some of the bigger, more established ones
and they haven’t been involved in the PPI refund saga either. It was a good
time to enter the market at when distrust of traditional banking was at an all
time high and coinciding with the changing habits of Generation Y and
Millennials, both of which are entirely comfortable with banking online and via
their smartphones.

What next for
digital payments?

Contactless payments have increased in number and eWallets like PayPal,
Apple and Google Pay have allowed payments to be stored and managed on
smartphones. As the use of contactless payments increases year on year, digital
payment methods, pioneered by the eWallet model of PayPal, will only get bigger
to fill the void left by traditional cash payments. And nowhere is this seen
more than in online retail.

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