Beyond Buy Now, Pay Later: How Citi is Reinventing Point-of-Sale Lending
Citi executive Terry O'Neil explains how the bank is integrating payment solutions across physical and digital channels while maintaining security and trust, as consumers increasingly demand flexible payment options at point of sale.
By Justin Estes
As embedded financial products and flexible payment solutions reshape consumers’ interactions with banking services, financial institutions must evolve their strategies to meet changing customer expectations.
On a recent episode of the Banking Transformed podcast, host Jim Marous spoke with Terry O’Neil, head of connected commerce for Citi Retail Services and head of strategic partnerships for Citi U.S. Personal Banking, about how the convergence of traditional banking capabilities with modern digital experiences is creating new opportunities.
Q: What trends are driving changes in consumer payment preferences?
Terry O’Neil: I would say what I’ve seen over the past couple of years is the consumer is squarely in the driver’s seat. As we’ve spent a lot of time talking to merchants and consumers, we’ve heard a lot about consumers seeking flexibility when shopping. It really comes down to them wanting to understand how much an individual purchase is going to cost them on a monthly basis.
Based on the research that we’ve done, we really think that it comes down to a consumer wanting to understand how larger or more unexpected purchases or splurge purchases might fit into their monthly budget. So, they’re making the decision less about something costing $500 or $1,000 or $2,000, and they’re really looking at it based on how much it costs them per month and are the payment terms that fit within their budget available to them when they’re making that purchase decision.
Q: How has consumer demand shaped point-of-sale lending?
O’Neil: : I think it comes down to making sure that there is an issuer in the space who understands the point-of-sale lending. As I said, Citi retail services have been in point-of-sale lending for nearly 40 years, and we’ve invested an awful lot in understanding how to underwrite a consumer when they’re trying to make a purchase.
Because our credit products have always been embedded in merchants’ sales journeys and we’re business-to-business-to-consumer issuers, we consider several different things when we move a consumer through the application. First and foremost, are we supporting our merchant partners in executing that transaction? Are we helping them drive sales completions and average order values?
Managing Credit Risk in Real-Time
How does point-of-sale lending differ from traditional credit decisioning?
O’Neil: With Citi Pay, our embedded payment products, we underwrite the consumer. We use tools like requested sales amounts to understand what the consumer is trying to purchase and their purchasing power. We check the bureau and report that line to the bureau so other lenders can have a more complete view of the obligations that the consumer is creating.
Q: What do merchants need most from payment integration partners?
O’Neil: From a merchant perspective, their concerns when they have a partner like Citi, or their focus when they have a partner like Citi, should be, "Are you helping me increase my average order value? Are you helping me increase my sales completion rate? And are you helping me manage my overall cost of credit?" If you can’t make it easy and intuitive to integrate credit into the merchant sales journeys, you can’t offer credit to the end consumer.
Q: How are merchants balancing physical and digital payment experiences?
O’Neil:: I think it’s incumbent upon everybody to ensure that the payment strategies you deploy operate across physical and digital channels. We know from consumers and merchants that consumers will often start a shopping journey online via research, find the products they’re interested in, and then close that sale at a physical point of sale.
For Citi Pay, we’ve invested in ensuring that the product operates the same way, whether in a digital or a physical channel. We’ve also invested in strategies enabling a consumer to start an application or pre-qualify for the product in the digital channel and close the transaction in the physical channel because we know consumers move seamlessly between digital and physical channels.
Q: How are merchants balancing physical and digital payment experiences?
O’Neil: I think it’s incumbent upon everybody to ensure that the payment strategies you deploy operate across physical and digital channels. We know from consumers and merchants that consumers will often start a shopping journey online via research, find the products they’re interested in, and then close that sale at a physical point of sale.
For Citi Pay, we’ve invested in ensuring that the product operates the same way, whether in a digital or a physical channel. We’ve also invested in strategies enabling a consumer to start an application or pre-qualify for the product in the digital channel and close the transaction in the physical channel because we know consumers move seamlessly between digital and physical channels.
Q: What role does technology play in creating seamless payment experiences?
O’Neil: We invested in delivering the products via APIs and standardized development kits. When you consider calculating the monthly payment on those purchases, whether they’re on the product pages, in the shopping cart, or at the checkout, marketing widgets allow the merchant to ping us via an API. We’ll instantaneously calculate the monthly payment for the product based on the purchase terms that we’ve agreed to with the merchant.
That makes it very easy for merchants to integrate Citi Pay products into their points of sale and sales journey. Traditionally, if you think about highly bespoke private label products or co-brand products, those are deep customized integrations measured in months. With Citi Pay, however, because it’s API-driven and we deliver the capabilities and calculations via widgets, it takes weeks or days to integrate the products into the merchant’s point of sale.
Security and Trust in Modern Payments
Q: How important is institutional trust in payment innovation?
O’Neil: Security is top of mind. Consumers think about the payment options they use, whether in digital or physical channels, and they’re thinking about whether or not their data and the transaction will be secure. They have told us overwhelmingly that they want these products from trusted financial services institutions like Citi.
The response was overwhelming. First and foremost, they said that they know we are a payments leader, so they expect the transaction and their data to be secure, and they trust us. They finished by saying that they prefer these products from leading financial services institutions because they know their data will be secure.
Q: What security considerations shape embedded payment solutions?
O’Neil: Within Citi Pay, because we move the customer through the application on their own device, we can capture e-sign consent and terms and conditions so that we know definitively at the point of sale that the customer received the terms they were supposed to receive.
All of that helps us not only deliver on our aspirations for the merchant, helping them drive average order value and sales completion, but it also helps us ensure, from a compliance standpoint, that we have captured the terms and conditions, the customer is in the right promotion, and we’ve captured e-sign consent.
Learn more:
- Payments in 2025: 5 Strategic Priorities for Bank Execs
- Community Banks Face Perfect Storm of Cybersecurity, Regulatory and Funding Pressures
- How Spending Priorities and Financial Health Guide Consumer Credit Card Choices
The Future of Personalized Commerce
Q: How will personalization evolve in embedded financial services?
O’Neil: It’s going to be key. I would say that we’re starting to see pieces of it now. We have access to a significant amount of data. If you think about the fact that we’re working at the intersection of merchants and consumers, we’re standing at the checkout when a customer’s trying to buy something from a merchant. That provides us with a tremendous amount of data that merchants and issuers can leverage to customize offer and promotional strategies.
I think you’ll start to see in the coming time that merchants and issuers will start to use that information and leverage, obviously, customer consent to deliver much more personalized offers, whether in the digital or physical channels.
Q: What innovations are most likely to reshape payment experiences?
O’Neil: Initially, we probably would’ve thought about pay-in-four strategies or alternative financing strategies as being driven by certain demographics or certain generations. We’re seeing that spans demographics and spans generations.
As I said earlier, based on our research, Citi Pay’s digital line of credit can support up to a hundred different pricing strategies. We believe that when consumers use alternative financing, they often do so for multiple purchases or transactions.
We want them to see all of those transactions in one place so that they can understand that if they’ve made three $50 monthly payments over six months, they can see that it’s $150, and they can view that all in one place. Viewing those transactions in one place, seeing them in one statement, and understanding how long those payment strategies will be in place can help you manage your finances and budget much more effectively than you otherwise might be able to do.
We will continue to see the convergence of physical and digital because we’ve heard from consumers loud and clear that what they see in digital channels, they need to and demand what they see in physical channels. As more information becomes available, I think consumers will start to expect and demand that the offers will be more specific and personalized.
For a longer version of this conversation, listen to the full episode of the Banking Transformed podcast with Jim Marous, "Payments and Embedded Finance Evolution: The Citi Experience," available here. This Q&A has been edited and condensed for clarity.
