How Three Banking Organizations are Leaning into Payments to Power Growth
By Steve Cocheo, Senior Executive Editor at The Financial Brand
Simple Subscribe
Subscribe Now!
Executive Summary
- Apple Federal Credit Union launched a debit-based buy now, pay later effort in early May. The program, aimed at younger members, could help them refinance expensive plans from the likes of Klarna and Affirm at credit union rates.
- Citizens Bank revamped its entire line of credit cards, but not to capture a big chunk of the card market. The fresh card strategy aims to help the bank widen and deepen relationships with existing customers.
- Paze, the ecommerce payment solution from Zelle parent Early Warning Services, is partnering with major payment processor Worldpay to put its card-based tokens on more sites.
Apple Federal Credit Union: Turning the Buy Now, Pay Later Concept into a Debit-Based Budgeting Tool
Veteran consumer lender John Ritchey studied the buy now, pay later phenomenon for Apple FCU, and saw a niche the credit union could occupy. Instead of going at BNPL head-to-head as a point-of-sale product, competing with the likes of Affirm and Klarna, Ritchey saw the offering — called PayAdvantage — as a way to help members engage in some after-the-spend budget balancing.
“We have a fairly young membership base compared to many other credit unions,” says Ritchey, senior vice president of lending. He had in mind that the post-purchase plan could serve as a do-over for expenditures drawn from their debit card account, allowing cardholders to regain what they spent and put the purchase into an installment plan instead. (By contrast, some major credit card issuers offer consumers the ability to turn charges into payment plans, also after the time of purchase.)
A couple of scenarios came to mind while Ritchey was working out the product. One might be a weekend of fun, or a vacation, that turned out to be more expensive than the member bargained for. Another example: The planned routine oil change that turns into an expensive repair. The members will have paid, in either case, out of their debit account deposit. But in retrospect they would rather have the money back in their account and borrow for the short term.
“They may get home and suddenly realize that they still have to pay their rent or other bills,” explains Ritchey. PayAdvantage, which debuted in early May, gives them the opportunity to turn the debit transaction into a credit transaction that will run over three, six or nine months. (Apple Federal worked with Equipifi to set up the program.)
“I equate this to the saver who thinks, ‘I saved this, I didn’t really want to spend it. I had a good vacation, and I don’t mind paying it back over a longer period. I have the money to pay it off, but I’d rather not drain money from my account’,” says Ritchey. The member can choose to make payments through automatic deductions or to be billed under the payment plan.
Want more insights like this? Check out Elan’s content portal: Credit Card Issuance: Strategies & Solutions
During the product’s design phase, Ritchey saw an opportunity for Apple Federal in charges members were making with mainstream BNPL lenders.
Many of those companies promote the 0% offers that merchants subsidize to boost sales, Ritchey notes. However, not all BNPL plans are interest-free. In fact, he points out, “they can go as high as 38%.”
So, Ritchey built a special feature into PayAdvantage: Members are permitted to use their Apple Federal debit card to pay off the BNPL plan and then, effectively, refinance it via the new program. He says that while BNPL providers and even very large bank credit card issuers may charge rates well over 20%, federal credit union loan interest rates are capped at 18% through March 2026. Even paying the highest rate permitted, which Ritchey says only applies to certain borrowers, represents a substantial savings — which he points out fits the credit union member mission.
PayAdvantage usage is subject to the size of a member’s total deposits and the number of accounts they have at Apple Federal, plus an analysis of the member’s daily balance. Typically, members have a cap of $2,000 for a single transaction, with an overall limit of $2,500 spread over as many of five transactions. Ritchey says the numbers may be adjusted as the credit union gains more experience with the product. Use of PayAdvantage is driven by personalized offers made after the purchase that the consumer sees in their app or online.
Reception has been enthusiastic so far. As of late May, approximately 800 members had used the service, averaging two plans per member thus far. It’s early days, but barring things leveling off, Ritchey thinks Apple Federal could hit its first year goal.
Read more:
Citizens Bank: Revamping Its Entire Credit Card Lineup to Lean into Relationship Banking
Citizens Bank has retired its entire old line of credit cards and replaced it with a new lineup aimed at accomplishing several key goals in consumer relationship banking.
The new program adds significant enhancements at “the bookends” of the card audience, according to Adam Boyd, head of lending at Citizens. That’s his term for the top tier, the bank’s upscale customers and private banking clients, and the bottom tier, Citizens customers who have little or no credit history.
At the top, Citizens wanted to sweeten the deal to make their cards more attractive. At the other end, it wanted to begin to build out newer relationships. “When you talk to some of the folks in our retail branches, there’s been significant demand for that,” Boyd says.
Beyond deepening relationships with customers not already having Citizens cards, Boyd wants to stimulate growth in payments.
“While we’ve done a good job getting Citizens credit cards into Citizens’ customers’ wallets, we haven’t done a great job of delivering a product that a customer is really incented to use on an ongoing basis,” says Boyd. “We lag industry benchmarks in both activation and usage.”
Boyd believes the value proposition of its cards has been substantially improved across the line and that that will improve the bank’s wallet share.
Historically, Citizens has not charged annual fees on its cards.
The first three levels of the new program still feature no annual fees. Citizens Amp Mastercard, the new introductory product, features financial literacy content and tools and merchant offers. Citizens Spring World Mastercard features a lower rate plus a package of Mastercard benefits. Citizens Summit World Mastercard offers unlimited 3% cash back on groceries and dining and unlimited 1.5% cash back on all other purchases as well as the Mastercard benefits package.
But at the top level. The Citizens Summit Reserve card, which includes an expanded unlimited cash back, expands benefits significantly while adding a fee. Among the features are travel credits on Lyft, Global Entry/TSA PreCheck services, airport lounge visits, and concierge services.
Summit Reserve also comes with a metallic card. Boyd says the bank’s research indicates that physical appearance of cards is increasingly important, especially among younger consumers, “despite the fact that digital wallets have taken off and lots of customers are using their phones as payment vehicles.”
The sticker price on this card is $295 annually, but customers who have Citizens’ Quest checking earn a discount to $95. Quest checking is the bank’s mass affluent service, requiring, among other things, $5,000 in monthly deposits or maintaining $25,000 monthly combined deposit and investment balances.
For Citizens, this is a play for a key demographic.
“The consumers who are gravitating towards fee-based card products are higher-income younger consumers,” says Boyd. “There’s a lot of industry data out there that they are not just accepting of annual fees when the value proposition supports a fee, but that they are actively seeking the perks of fee-based products.”
Boyd adds that this is a new development in the market and “a segment we haven’t participated in at all,” up until now. Citizens hopes this will increase credit card penetration among its younger, high-income customers. (The private banking card is an overlay on Summit Reserve.)
Overall, the bank intends the new lineup to lead to deeper relationships with its customer base, more so than pulling in more credit-card-only customers. Citizens will be cross-selling the card through customer digital channels and in-branch marketing. The latter includes complete branch takeovers during the launch period.
Read more:
Paze and Worldpay Partner to Boost Access to Zelle’s Digital Wallet Cousin
One of the gray areas of post-Covid payments is the division between ecommerce and point-of-sale transactions, and this has implications for Paze, the ecommerce checkout solution that Early Warning Services announced in early 2023.
Paze was introduced as an ecommerce-only digital wallet, not one where the user would wave and pay with their phone at the point of sale. Instead, payment credentials for consumers with cards from participants in Early Warning Services are pre-loaded in Paze. When consumers frequent a website or app offering Paze as a choice, the shopper can opt-in and have their payment processed using a token from Paze. (Users doing business with multiple bank issuers can choose which card comes up first as their default option.)
At first glance, that would seem to preclude Paze transactions from any kind of physical setting, other than when goods are delivered the customer’s door. But that’s not the only way ecommerce works today. Frequently there’s a hybrid effect, where the consumer orders via a website or mobile app, but picks up what they’ve bought at a physical location. This could range from ordering coffee or takeout in advance to buying parts from a home center digitally and picking them up at curbside later.
This evolution becomes more interesting in light of the announcement that Paze is partnering with Worldpay, a major payment process doing business in 174 countries. The company processes over 50 billion transactions annually. The deal was announced in early June.
Paze will be added to the options that merchants can add to the functionality provided for them on websites and mobile apps by Worldpay. This may be on merchants’ own pages, with processing by Worldpay, or on hosted pages operated by Worldpay on behalf of merchants.
The former category is generally the structure used by large merchants that Worldpay serves.
For these enterprise sellers, “it’s actually a relatively easy implementation for them and for us,” says Cindy Turner, chief product officer at the processor. “So we’ll be able to carry Paze-generated tokens for them this year, before the holiday freeze.”
The holiday freeze mentioned is the period where changes to payment streams are typically not done in order to avoid issues during the peak retail selling season. Typically the freeze begins in November.
Turner adds that for smaller merchants, served by hosted payment pages run by Worldpay, but merchant-branded, Paze availability will begin to be offered in early 2026.
In the U.S. Worldpay’s client base includes many merchants selling everyday goods, which could lead to a good deal of repeat business for Paze. Turner notes that Worldpay processes for many of the country’s pharmacy chains, for example.
Eric Hoffman, chief partnership officer at Early Warning, says that a good deal of selling lies ahead, initially to get the enterprise merchants on board. Everyday spending is a plum for issuers because of the high volume of repeatable purchases it entails. Hoffman notes that many of the merchants offering such goods and services have been Worldpay customers for decades. “So these are very deep, rich relationships,” he says.
Hoffman says he doesn’t have an estimate at this time on the increase in volume that the Worldpay deal would bring.
A key selling point is that more than 150 million debit and credit cards issued by Early Warning’s seven bank owners have been loaded into the Paze system. “We’ve made significant progress on that and we’ll continue to grow that number as more portfolios from our owner banks are added,” according to Hoffman.
A goal from the start for Paze has been to also add cards from other, nonowner banks and credit union to the base. Hoffman indicates that this is expected to actually begin happening during 2025. The point of numbers is to portray Paze to merchants as having many potential buyers.
A key point for Paze is that pre-loaded credentials can potentially reduce cart abandonment and raise merchants’ purchase completion rates.
Hoffman says that as major merchants get on board this year the bank issuers taking part in Paze will be marketing to cardholders to encourage usage. He says this could encourage more consumers to activate their Paze connections.
Read more:
