Banks want to defend their customer relationships from popular digital wallet providers, but to succeed they will need to get a handle on their tech and fraud dispute issues, according to an analyst.  

The seven big banks that own Zelle parent company Early Warning Services – including JPMorgan, Bank of America, Wells Fargo, and Capital One – plan to launch a digital wallet that people can use to shop online.  

The offering is still in the works, according to a Wall Street Journal report on Monday, and is motivated by a desire to fend off services like Apple Pay, PayPal, Amazon’s “Buy with Prime,” and Venmo on Amazon, which erode banks’ direct relationships with their customers. 

This effort’s success will rely on consumers’ sense of trust in the banks’ solution over those from tech firms – but right now that’s not a given.  

While these banks “can’t ignore the opportunity of expanding their network with retailers,” they need to work out some issues first, Richard Crone, owner of Crone Consulting LLC, told Insights Distilled. 

The announcement comes hot on the heels of scrutiny from lawmakers about Early Warning’s lack of accountability and reimbursement for fraud on Zelle and a Bank of America glitch last week that temporarily led to money disappearing from users’ Zelle accounts. “What happened was a mismatch of legacy – dare I say antiquated – code running afoul of the real-time payments processing that’s initiated by the Zelle network,” Crone said. And worse, users weren’t offered easy ways to get help or information.  

These kinds of issues need to be thoroughly addressed ahead of any new product launches, for the sake of consumer protection and banks’ own reputations.  

“Before they expand to the point of sale,” the banks behind Zelle “must first create consumer-friendly policies and procedures for transaction repudiation, chargebacks, and disputes,” Crone said. “These will have to address bona fide nefarious actors and ‘friendly fraud’ for payments not recognized from consumers, as well as system outages from their participants in the banking industry, as evidenced by the Bank of America incident last week.”