Banks are often taken for granted in digital wallets, treated as a "dumb pipe" for funding another account. PayPal is working to provide a more welcoming atmosphere with deals recently announced with Citigroup, FIS and two other banks.
Financial services technology provider FIS has entered an agreement with PayPal to add bank brand images to PayPal checkouts. This follows a shift in tone at PayPal that began with its cease-fire with Visa, which disliked PayPal's longstanding practice of urging consumers to fund PayPal via bank accounts instead of Visa cards.
Separately, Citi announced Dec. 15 that it also was entering a partnership with PayPal in which its cards would be tokenized for in-store purchases using PayPal. FIS describes these deals as pivotal to the expanded use PayPal's product.
"The bank branded impression is an important attribute, but it also allows the consumer to associate the payment with the security offered through the bank," Doug Brown, senior vice president and general manager of mobile at FIS. "They are using PayPal through a source they know protects their funds successfully."
Starting in January, customers at two FIS client banks — Wintrust and Avidia — will have the option to register for PayPal through the bank's mobile app or digital online banking. After registering, the bank's logo will appear during PayPal checkout as an option in the one-click payment method. FIS plans to expand its service to other clients during the first quarter of 2017
Wintrust and Avidia also use FIS' Cardless Cash ATM service, another collaboration through PayPal that provides a mobile channel for receiving funds.
Wintrust tried to work with PayPal on another project four years ago, but it was not the right time for such a collaboration, said Tom Ormseth, senior vice president of non-credit services at Wintrust Bank in Rosemont, Ill. That has changed, in part, because of new PayPal CEO Dan Schulman's friendlier approach to banks and card brands, Ormseth added.
"Their approach now is a good one going into the future," Ormseth. "I feel comfortable in the way PayPal is now working with banks, rather than trying to replace the banks. We can work together for the betterment of our customers."
In that regard, PayPal recognizes that consumers trust their banks, and the online payment giant sees much value in bolstering the consumer's confidence for the end-to-end process of a payment, FIS' Brown said.
The arrangement with PayPal allows FIS bank clients to potentially offer other mobile services to customers through that channel connection, said Richard Crone, chief executive of San Carlos, Calif.-based payments consulting firm Crone Consulting LLC.
"Card numbers are not just card numbers, they are really a connection point to the bank's brand, if you have a way to do it through mobile," Crone said. "And now they have a way to do it."
It is not entirely different from when Chase moved its brand to the front of its payment cards and moved Visa to the back of the card, or in a less prominent position, Crone added. "The banks can get the brownie points on offers now, rather than Visa or Mastercard."