Much like it's doing with its Zelle P2P app, Early Warning is trying to demonstrate its Paze digital banking wallet's appeal to a wide audience to compete with nonbank apps from Apple, Google and fintechs that dominate mobile wallets.
Paze is getting a boost from Star One Credit Union, which says a subtle difference in the bank-owned Paze – the fact that it does not share credit card numbers with merchants – helped win it over.
"Our members are no exception to the trends that we're seeing in the tech industry toward e-commerce and digital wallets," Minal Gupta, president of Star One Credit Union, told American Banker. "But we have heard concerns about the digital wallets storing personal and card information."
The Sunnyvale, California-based Star One Credit Union, which has about $9 billion in assets, recently started offering Paze to members. Early Warning hopes to expand Paze by adding users that are often competitors to large banks, such as community banks and credit unions. The benefits are Paze's network gets larger, while the smaller institutions gain access to a comprehensive digital wallet.
"This gets us close to our long-term goal of supporting all financial institutions large and small," Eric Hoffman, chief partnership officer of Early Warning, told American Banker
A look at Paze
Paze aggregates eligible debit and credit cards into a single wallet, which is designed to reduce friction at checkout and improve security by not sharing credit card numbers. Other design features include eliminating manual card entry at checkout allowing consumers to pay in a few seconds without creating new usernames or passwords.
Paze's network includes Early Warning's owners: Bank of America, Capital One, JPMorganChase; PNC, Truist, U.S. Bank and Wells Fargo. Other adopters are Elon Financial Services, a bank technology company which has added about 1,000 financial institutions to Paze. There is also a pipeline of Paze-supporting banks that Early Warning said have not been announced.
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"The vision is to build a two-sided network with merchants on one side and the issuers [on the other] to reach consumers," Hoffman said. Early Warning recently partnered with payment company Payfinia to offer Paze. The Sunnyvale, California-based Star One is the first financial institution to onboard Paze through Payfinia. "We need to make sure we're in this space to stay relevant," Gupta said. The Payfinia partnership, which Early Warning signed in July, followed similar deals Early Warning signed with Fiserv and Worldpay in June. Fiserv provides access to financial institutions while Worldpay has a large network of merchants.
"Fiserv is already a Zelle supporter and supports thousands of banks," Hoffman said.
Paze's challenge
Zelle, Early Warning's older P2P app, has been on a similar trajectory. Created to power a bank-led rival to PayPal's Venmo, Zelle in June reported progress in adding
Zelle has more than 2,300 financial institutions on its network, 95% of which are community banks and credit unions, and has benefited from Early Warning's Zelle partnerships with Fiserv, Jack Henry and other bank technology companies.
Distribution deals will also help Paze scale, according to payment experts.
"Paze has been adding a lot of cardholders, and its partnership with Fiserv is going to add a lot of credit unions and smaller banks," Aaron McPherson, principal at AFM Consulting, told American Banker. "The motivation for these institutions to add Paze is similar to that for Zelle; they've got some experience working with Early Warning now, and they are feeling more pressure to have a digital wallet offering."
Getting more merchants on board is really critical to getting more small financial institutions to add the service, McPherson said.
"The partnership with Worldpay should help with that. There is a lot of competition, however, from ShopPay, which I do see a lot of, to Apple Pay and Google Pay and PayPal," McPherson said. "However, Zelle came from behind to dominate P2P payments, so there is reason to think that direct bank integration will help Paze do better in the future."Still, Paze will face heavy competition in a crowded market.
"There are already 9 to 12 wallets in the market, and I am not sure how effective Paze will be in driving adoption," Tony DeSanctis, senior director at Cornerstone Advisors, told American Banker. "I understand the desire to have a wallet position, but I am skeptical that Paze can overcome the lag. Obviously, it was able to achieve scale with Zelle despite the head start that Cash App and Venmo had. But I don't think you can lag Apple for over a decade and expect to be able to catch up."
"From the consumer perspective, I am guessing most places that accept Paze will already accept Apple Pay, Google Pay, Shop Pay, Affirm Pay, Klarna Pay and others. We will be hard-pressed to see the benefit of adding another wallet," DeSanctis said.
