Bank of America’s recent announcement that it was planning to charge a $5 monthly convenience charge for debit card users has already elicited a widespread backlash from both customers and politicians. Financial institutions, which tend to ratchet up their fees across a wide swath of their customer base to make up for lost income, have always banked on the “stickiness” of their customers. While customers may have been “stuck” several years ago, that is no longer the case. Companies such as Google, PayPal and Square are now offering a wide range of alternative payment mechanisms that could finally mean lower transaction costs for consumers.
Indeed, emerging technologies like NFC (Near Field Communication) could lead to financial disintermediation on a scale that the top brass at Bank of America never imagined. Alternative payment providers such as Google are set to shake up the way we make everyday payments by converting customers slowly but surely to the notion of the Digital Wallet. Square, founded by Twitter’s Jack Dorsey, is gaining momentum by making it possible for small businesses and independent contractors to accept card payments at the point of sale without the need to open a merchant card account. PayPal, viewed by many as only a way to settle online transactions on sites like eBay, is opening up a new pop-up store in New York City to showcase new payment alternatives for retail merchants.
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