Citizens Bank rebrands Citizens Pay: Will more banks enter into buy now, pay later?

Last week, Citizens Bank announced the rebranding of its point-of-sale lending platform for merchants. Citizens Pay provides retailers with consumer credit options for large purchases through fixed monthly payments that can be used for repeat purchases without a new credit application. 

Point-of-sale financing and Buy-Now-Pay-Later markets are gaining major traction in the U.S, especially among millennials and Gen Z consumers, who are eager to escape revolving credit card debt. The pandemic has primed major players in the BNPL industry such as Klarna, AfterPay and Affirm to increase their merchant and consumer networks because of the greater shift towards virtual shopping. According to World Pay’s 2020 Payments report, BNPL competitors are expected to triple their e-commerce market share by 2023. 

“Consumers are demanding transparent, modern financing options that deliver fixed monthly payments with no ‘gotcha’ fees,” said Citizens Pay president, Andrew Rostami. “As a bank we are able to offer customers the lowest possible installment payments with flexible terms and the lowest possible cost to the merchant, which allows them to convert more purchases and provides a way for shoppers to upgrade their purchases, resulting in higher average-order-value for the merchant.” 

Citizens Pay also offers a product-as-a-service ability for manufacturers to embed financing into their products. It was first launched by Citizens in partnership with Microsoft for the sale of Xbox All Access at retailers such as Target, Best Buy, WalMart, and GameStop.

“All original equipment manufacturers in categories ranging from electronics to appliances can leverage this solution to bundle their products and services and encourage their consumers to upgrade their products more frequently,” said Rostami. 

The bank has expanded its portfolio to include retail verticals in fitness, health, home improvement and educational products.

Citizens launched point-of-sale lending in 2016 and has originated over $6.4 billion in loans while serving more than 5 million accounts. Citizens is one of the five largest banks currently participating in point-of-sale financing including Citi, Regions Bank, Fifth Third and Synovus. In November of last year, JPMorganChase launched its BNPL platform, My Chase Plan which offers consumer credit for fixed monthly payments for purchases worth more than $100.

Despite a few traditional banks competing in the sector, small to midsize banks especially remain relatively outpaced by fintechs in the POS lending sphere. 

“If the introduction is as successful as the promise for those who use it, then we are likely to see a forced hand for competitors who will need to offer a similar extensive and useful experience or face losing customers.” said Charles Steiner, CEO of Creditful.

Traditional banks that venture in point-of-sale lending will have the distinct advantage of benefiting from consumer trust and brand loyalty as a consequence of their established regulatory frameworks and compliance oversight.

“I wouldn't be surprised to see one of the next forefronts of commercial and consumer banking alike is to develop private retail POS platforms for their clients,” said Jim Pendergast, senior vice president of altLINE, the Southern Bank Company’s lending arm.

“These would serve as direct competition to Citizens Pay and others like Klarna, and they come with the brand security and assurance of an FDIC-insured institution. That works to improve adoption rates, since customers and merchants alike would be more likely to use this new type of payment transaction if it comes from an already trusted institution.”