Citizens debuts consumer financing for SMBs with fintech partner
Citizens Financial Group, which has a booming buy now/pay later business with large technology merchants like Apple, Best Buy and Microsoft, now wants to crack the small-business services side.
Citizens announced Thursday that it is working with Wisetack in a partnership that will initially focus on BNPL loans for consumers fixing up their homes, repairing vehicles and getting medical services in a tightening economy.
Large merchants and e-commerce sellers saw explosive growth of BNPL loans during the pandemic, but momentum has been slower for small businesses that operate in person. One reason is the fragmented connections between prospective borrowers and lenders, a gap that Wisetack has been working to close with a platform that connects in-person service providers with BNPL lenders.
Wisetack, based in San Francisco, has spent the last five years creating technology that enables banks to directly provide BNPL loans for consumers paying small businesses through its connections to platforms including Housecall Pro, Thumbtack and Jobber, bypassing credit card rails.
The deal with $222 billion-asset Citizens is Wisetack's first partnership with a large bank; until now it's worked solely with smaller fintech banks, including San Marcos, California-based Hatch Bank, which has $178 million in assets. Wisetack may add other banks as partners as well, said Bobby Tzekin, co-founder and CEO of the company, which has raised $64 million in venture capital for its platform.
"Citizens brings us low-cost capital with great technology and the ability to plug in tightly to offer a wider range of loans to small business' customers," said Tzekin, who previously held executive roles at Lending Club, solar-energy lender Mosaic and Yapstone. Earlier in his career Tzekin spent seven years at PayPal, rising to group product manager, merchant solutions.
Wisetack enables small businesses to offer a BNPL loan to a consumer on the spot, with installment payments spread out over three to 60 months, in conjunction with the job estimate. When the consumer agrees to the deal, the bank pays the merchant and takes over loan management. Individual loans can go as high as $25,000.
Small businesses using Wisetack typically extend BNPL offers through a mobile device or email, Tzekin said.
Citizens, based in Providence, Rhode Island, sees Wisetack as a way to reach many small-business customers through a single connection, while tapping into new business-to-business verticals, said Christine Roberts, executive vice president and president of Citizens Pay.
"Traditionally we've gone directly to merchants with consumer financing, but working with Wisetack – which has relationships with many small-business platforms that in turn can reach thousands of entrepreneurs – we'll extend our lending opportunities," Roberts said.
The partnership marks Citizens' first push into the small-business sector, which Roberts says encompasses about 33 million U.S. small to midsize enterprises, with many lacking streamlined consumer-finance options for home and personal projects.
"With rising interest rates, I think more people are going to be staying in their homes and looking to renovate instead of move," Roberts said.
Industry observers predict exponential growth on the business-to-business side of BNPL during the next several years.
"The B2B BNPL model appears poised for 2023 growth because it facilitates third-party credit and risk-management tools that improve cash-flow flexibility for businesses by accelerating credit approval while mitigating repayment risk," wrote Jeroen Hölscher, global head of payments and card at the global consulting firm CapGemini, in a recent blog post.
Citizens claims to have an edge over other lenders in the BNPL arena because of its deep experience in offering installment loans in specific niches, beginning in 2015 with Apple, and expanding in recent years to Microsoft for video games and Best Buy for deals on electronics and upgrades for existing equipment.
"Over the last several years, we've developed sophisticated models for customizing loans that consumers can afford within their existing budgets," Roberts said.
Citizens isn't relying solely on Wisetack for its small-business financing push, she said.
"We see potential in bringing our installment loans to more small businesses who want to work with a well-recognized institution – like an entrepreneur who wants to buy 10 computers at once, and doesn't want to put it on a credit card," Roberts said.
Despite the fact that many e-commerce platforms from Shopify to Square (through its purchase of Afterpay) are connecting small businesses with BNPL options, only a fraction of small businesses have access to installment loans, according to Roberts.
"I believe small business is the next frontier for point-of-sale and pay-over-time financing," she said.
