How Citi is strengthening its merchant relationships through Citi Pay

BNPL solutions are a prime example of the intersection of shopping with financial services, effectively integrating financial firms into the consumer’s purchase journey. An emerging trend is the growing involvement of financial institutions in the loan installment market. This is spurred on by the pressure to compete with non-bank players and address the shifting demands of enterprise retailers.

Citizens is one of the few banks that offers installment loans akin to BNPL programs through Citizens Pay — enabling consumers’ access to a revolving line of credit. Launched in 2015 and rebranded as Citizens Pay in 2021, the offering enables merchants to offer financing options to consumers at checkout.

Most recently, Citi’s Retail Services team took a step forward by offering installment loans to shoppers through its network of merchants. Last year, the bank introduced Citi Pay, a proprietary suite of pay-over-time solutions that includes digital credit lines and merchant installment loans, helping consumers split large purchases into smaller payments. Through Citi Pay Credit and Citi Pay Installment Loan, consumers apply for approval as they shop, with credit evaluation happening in the background. 

“Citi has an API integration with a third-party credit bureau that allows for real-time bureau unfreezing during the application process,” shares Kartik Mani, Head of Citi Retail Services.

The role of technology in Citi Pay’s growth

The relationship between banks and major retailers is evolving, fueled not only by new product launches but also by technology-driven changes in service design and execution.

With over three decades of experience operating at the crossroads of retailers and their customers, Citi gained insight into the rising demand from both sides for technology to enhance shopping and payment experiences. 

“From operating in this space, the consensus is clear: retail customer preferences are constantly evolving, and they’re demanding digital-driven payment products that are highly personal,” notes Mani. “For Citi Retail Services, technology is especially integral to how we partner with retailers today.”

Terry O’Neil, Head of Connected Commerce for Citi Retail Services and Head of Strategic Partnerships for Citi U.S. Personal Banking, double-clicked on this point in a recent Tearsheet Podcast episode. “What we heard, pretty loud and clear, from the merchants and the consumers that we spoke to, was that point of sale lending, or buy now pay later, is here to stay,” he said.

All of this culminated in the creation of Citi Pay.

The bank remains attentive to retailer feedback, leading to the addition of new features like conversational user interfaces to Citi Pay. The bank has also integrated machine learning across various touchpoints of the customer lifecycle in its Retail Services division, shares Mani.

“Technology is driving this shift in customer and retailer demand, and technology will continue to be critical in how we at Citi and other financial institutions respond with our products,” he notes.

Mani also believes there is significant potential for banks and retailers to utilize customer spending data to create more personalized rewards and promotions, enhancing the shopping experience and deepening retailer connections.

“Data and analytics are at the heart of the ongoing technological evolution shaping the future of financial services and retail partnerships,” he says.

What retailers want from their banking relationships

Mani outlines three critical areas where retailers increasingly rely on their banks to support their e-commerce strategies in the evolving shopping and payments ecosystem:

1. Trust: Trust is a fundamental quality that retailers seek from their banking partners, according to Mani. “When speaking with retailers, I often hear how highly they [retailers] value a partner they can rely on,” he says. 

Retailers look for partners who invest the effort to understand their business and tailor solutions to their specific requirements. According to Mani, a payments partner should offer not just security and reliability but also a mindset that aligns with shifting consumer expectations and adapts to long-term market changes.

2. Vision for emerging trends: As the scope of commerce broadens, Mani believes banks are tasked with anticipating key trends and positioning themselves to meet customers where they are. This requires both tactical and strategic foresight:

• On a tactical level, it’s about staying attuned to what customers value and delivering on those expectations.
• Strategically, Mani notes that personalized experiences and tailored offerings are becoming increasingly important. An essential element in this is data privacy. “As facilitators of commerce, we must be careful to never cross ethical boundaries, nor give the impression that we might. Maintaining this balance will be critical as the industry evolves,” he explains.

3. Ease of integration: Retailers place a strong emphasis on payment products that are simple to integrate.

To meet this requirement, Citi Retail Services has partnered with companies like Shopify, ChargeAfter, and FreedomPay, each addressing different aspects of the retail payment process. The core of these partnerships is to simplify payment integration for merchants by ensuring compatibility with their existing payment processes and reducing technical barriers.

“We’re focusing on continually improving our products, and some of our best ideas come from strategic fintech partnerships,” notes Mani.

How Citi leverages fintech partnerships to support retailers

Citi chose the partnership route over building everything in-house when it set out to develop the Citi Pay suite of products. 

Here’s why:

Partner quick over building slow: The bank chose this path to provide a consistent customer experience, with the notion that partnerships could enable quicker, scalable product launches and room for future growth.

“Pushing the envelope is not always about being the first to innovate. Often it is about seeing the innovation in the industry and then moving quickly and at scale to improve on the existing innovation,” asserts Mani.

He notes that Citi Pay is an example of this approach — it’s not just “buy now, pay later, but buy now, pay better.”

Partnership strategy: Mani explains Citi Retail has made a strategic choice to collaborate with fintechs like ChargeAfter and FreedomPay to streamline the merchant onboarding and integration process, benefiting both their merchant partners and customers. ChargeAfter speeds up customer onboarding by pre-filling their application forms, whereas, FreedomPay is a commerce solution that integrates with live POS systems.

“On my team, I’ve seen first-hand how strategic partnerships with fintechs make us and our products even better,” notes Mani. “They make us nimble and have allowed us to expand into new audiences and grow our network.”

The bank’s Retail Services has also collaborated with Shopify, where many merchants already operate. This enables merchants to access and integrate the Citi Pay plugin directly through Shopify, simplifying the process via APIs.

“For any bank focused on retail partnerships, the ultimate goal should be to bring financial solutions to their loyal customers quickly, accessibly, and at scale,” says Mani. “Strategic partnerships can be a great way to do this.”

Putting the customer experience above all: Mani highlights that Citi’s partnerships within Retail Services, including those with Shopify, ChargeAfter, FreedomPay, and credit bureaus, are all centered around improving the customer journey.

“The underlying story for us is that we are willing to partner and learn, and we get a lot out of our partners,” he adds.