Apple Pay Is the Latest Reason It Stinks to Be a Traditional Bank

NEW YORK (TheStreet) -- As if banks didn't have enough problems, along comes Apple Pay.  

Apple's (AAPL) new mobile payment system, which the company introduced this week, is expected to be part of a multi-billion dollar industry within the next few years. Although banks are actively working with Apple to adapt to the new technology, it is still a major threat to their conventional payment channels.

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The challenge isn't new, of course.

Apple is just the latest to enter an ever-growing field that includes eBay's (EBAY)  Paypal. Large non-traditional consumer banks such as Capital One Financial (COF) and American Express (AXP) ,  as well as large banks such as JPMorgan Chase (JPM) , Citigroup (C)  and Bank of America (BAC) , are likely to feel the squeeze on their traditional banking services. The question is whether their involvement in the new payment channels will be as lucrative as the old way of doing business. 

Banks are seeing a host of other threats to their core businesses. Retail giant Wal-Mart (WMT) is trying to get into the retail-banking business, Lending Tree (TREE) offers online mortgages and Lending Club is a peer-to-peer lender working on consumer or business loans.

On top of that, banks face handicaps that the new competitors don't, such as growing regulation, higher overhead, capital restrictions and higher tax rates than that of tax-exempt credit unions. All this means that it is a very tough environment for banks.

The most vulnerable financial institutions aren't well diversified, are overly exposed to the retail consumers and have bloated and out-dated branching networks.

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