Nation’s leading banks to launch online payment service

Consumers looking to reduce debt may have turned to using online payment services instead of traditional credit cards, and three of the nation's leading financial institutions are attempting to capitalize on the sea change in the consumer debt industry.

Wells Fargo, JPMorgan Chase and Bank of America recently announced that they would launch an online payment service designed to compete with the industry giant PayPal, according to a report from the Wall Street Journal. If the venture is successful, it could increase revenues for the institutions by billions of dollars.

Currently, PayPal – which is owned by popular auction site eBay – accounts for about one third of its parent's operating profits, and has seen profits increase three times over since 2005, the report said.

The banks will test the service free of charge, and an executive told the newspaper that the change comes because the institutions saw that consumers are now far more interested in online transactions than they were in the past.

In addition, regulation of the online payment industry is far murkier than for traditional credit and debit cards, meaning the banks could see greater revenues from higher interchange fees.