Citibank Courts Merchants with a Twist on Embedded Payments Options

Citibank's retail services unit is rolling out a menu of embedded payments options for merchants to offer their customers. The new Citi Pay program includes lines of credit, installment plans, and special deals on the interest rates (0%, anyone?) that the merchant can sponsor. Credit evaluations are nearly instantaneous.

Citibank is getting more active in embedded banking. Its Citi Retail Services unit now offers “Citi Pay,” an assortment of payment options that merchants can provide to their customers.

The new program debuted earlier this year with the introduction of Citi Pay Credit, a virtual credit card offered to customers when they are making a purchase. The service functions similarly to a store card, in that it gives customers an option to finance a higher-ticket purchase.

In coming months, the next expansion of the program will take place, with the introduction of Citi Pay Installment Loan. This will enable consumers to apply for interest-bearing installment plans that can be spread in equal parts over six to 60 months.

The new credit options are being rolled out online first, but merchants will be able to offer them at the physical point of sale in the future, according to Terry O’Neil, head of connected commerce and strategic growth initiatives for Citi Retail Services.

How Merchants Give Citi Pay Visibility

Merchants will be able to display Citi Pay as an option on the webpages where consumers are shopping, O’Neil says. This will serve as more of an impetus for some consumers to buy, knowing that they can do so without having to use a credit or debit card.

“Our product, Citi Pay, will be positioned alongside merchants’ ecommerce product pages, so customers can see their options while thinking about making a purchase,” O’Neil says. “They’ll also see it positioned in the merchant site’s shopping cart.”

Citi Pay Credit allows consumers to choose among options pre-arranged with the merchant. This could include a line of credit that can be drawn on for the purchase. Such purchases might bear a special promotional interest rate — even 0% — if the merchant wants to subsidize that to encourage sales. Citi Pay Credit also permits merchants to offer installment plans for major purchases.

With both Citi Pay Credit and Citi Pay Installment Loan, consumers apply for approval in the course of the purchase and undergo concurrent credit evaluation. The bank aims to provide decisions in less than a minute.

Citi Pay Credit options are not linked to any other forms of Citibank credit that the consumer may have. The intent is to give shoppers more choices, separate from Citi credit cards or whatever else they might have available. Likewise, while some Citi credit cards allow a portion of their credit line to be used as a personal loan, Citi Pay operates separately.

See all of our latest coverage of payment trends

What the Purchase Experience Is Like with Citi Pay

If consumers choose to use Citi Pay Credit, they enter a conversational user application interface, O’Neil says. To help merchants set this up so it is a seamless user experience, Citi Retail Services provides application programming interfaces (APIs) and standardized development kits (SDKs). Merchants then use the APIs and SDKs to embed Citi’s credit offerings into their online sales platform more easily.

As a virtual card, Citi Pay Credit has no plastic version. Instead, if the credit is granted, the bank will provide the merchant with a payment token, enabling the purchase to be made.

“We don’t see the need to issue plastic,” says O’Neil. “We believe the product provides the value necessary in a plastic-less environment.”

O’Neil says the idea behind Citi Pay overall is to take the best of what the bank offers in embedded payments, private label plans and point-of-sale lending and expand it to a broader number of merchants and consumers.

Most consumers want retailers to be able to provide more flexible payment options at checkout, according to research performed for Citi.

“When a consumer is making a larger purchase or an emergency purchase, they are thinking about how that purchase fits into their budget,” rather than about rate, according to O’Neil. Offering options makes it more likely they’ll find a financing choice that fits their circumstances and budgets.

Asked if the Citi Pay Installment Loan could be considered a form of buy now, pay later credit, O’Neil says no, citing the purchase price and the length of the financing as key differences. BNPL tends to be used for smaller purchases, he says, whereas the bank’s installment offering is intended to allow larger purchases to be broken into more affordable amounts. The most common form of BNPL credit is the pay-in-four approach, whereas the installment plans from Citi can last up to five years.

Read more: A Bright Future for BNPL Is in the (Bank) Cards

Citi Says Being Outside of the Digital Wallet Is an Advantage

Embedding its payment options into the sales and checkout process gives Citi Retail Services prime positioning. This strategy places Citi Pay closer at hand when people are shopping online than the other payment options they might have in their physical wallet or in a digital wallet on their phone.

“We aren’t reliant on wallet capabilities nor wallet functionality because we’re connecting directly with the merchant that’s putting Citi Pay in their point of sale,” O’Neil says.

The Paze digital wallet, being developed by Early Warning Services, is also designed to be presented as an option at checkout. Consumers will be able to decide when they activate Paze which of their debit or credit cards they want to designate as the default.

Paze will be available initially to customers of the seven large institutions that own EWS. This group includes Bank of America, Capital One, JPMorgan Chase, PNC, Truist, U.S. Bank and Wells Fargo. Elan, a U.S. Bank subsidiary that issues cards on behalf of credit unions and small banks, also will be part of the initial rollout.

Other financial institutions will be able to join Paze quickly after its pending launch.

Citibank is not part of the EWS ownership group. Asked if Paze is viewed as a Citi Pay competitor, O’Neil says Citi would not discuss the competitive picture.

Read more about Paze:


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