Early Warning’s digital wallet offering Paze readies for launch as the US’ biggest banks look to fend off Big Tech

US fintech Early Warning, owned by seven of the country’s largest banks and operator of P2P payment network Zelle, is set to roll out its new digital wallet offering next year.

Paze will roll out in all US states in Q1 2024

Named Paze, the new service will be offered by participating financial institutions in a bid to deliver an improved payment experience for consumers shopping online and fend off the growing advances of Big Tech giants in the financial services space.

Participating institutions include Early Warning’s co-owners Bank of America, Truist, Capital One, JP Morgan Chase, PNC Bank, US Bank and Wells Fargo, along with Elan, a financial services company that provides corporate and virtual credit cards.

“We’re now 20-plus years into the e-commerce journey and there continues to be persistent and unsolved problems for consumers and merchants – and therefore for financial institutions,” explains James Anderson, managing director of Paze, in an interview with FinTech Futures.

“The feeling was that through Early Warning, we could deliver a better and more secure experience, something that will result in better outcomes for consumers and merchants, and therefore issuers.”

The differentiator

With plenty of competitors in the market, most notably Google, Apple and PayPal, in what ways does Paze differ from existing digital wallets?

One key distinction which Anderson highlights is how Paze does the work of building the wallet for the consumer. This means that on signing up, all the cards that a consumer uses that belong to Paze’s participating institutions are automatically loaded onto the wallet.

After customers authenticate themselves and get access to the wallet, Paze also “pre-selects” the cards it thinks are most relevant for the consumer based on their historical e-commerce behaviour.

Another distinctive feature of Paze is the way it treats card numbers.

James Anderson, managing director of Paze

“When we take the card numbers from the participating financial institutions, we immediately swipe them for a network token,” Anderson says, “which means we are not storing the actual card number, but rather the network token – something that Visa, Mastercard and other payment networks have built over the last eight or nine years.”

He explains that network tokens come with a number of security and experience benefits that card numbers don’t have, including the ability to make every transaction unique.

The tokens are stored as 16-digit numbers, and at the point of transaction, Paze combines the token with a 20-byte cryptogram to create a “long, random” number to enhance its security.

“If anything is compromised at any point in the travel of that data across the internet, it is useless to anybody who gets a hold of it,” Anderson explains.

As it stands

Paze is currently in the “first wave” of its rollout, testing its technology with the “tens of thousands” of wallets it has built for the employees of its owner banks.

Anderson states that a full rollout is still a few months away, with plans to launch in all US states in Q1 2024. However, he adds that the firm will be launching in one state this year, without naming which one it’s going to be.

“We had contemplated doing the rollout this year, but felt it was more prudent to take a bit of a step back and make sure everything has been working as planned,” he says.

“This is a very large initiative – we are owned by seven of the largest banks. We have a big responsibility to make sure we’re delivering a great user experience for the consumers and so we decided to wait till early next year for the full rollout.”

Navigating the market

Anderson notes the presence of Big Tech players in the market, but claims that what sets Paze apart is its “tight connection” to a consumer’s existing financial institution.

“With consumers, there is a high degree of trust with the financial institution, which makes sense because it’s a place where people send their paycheques, and a place you go to get a mortgage and buy a house,” he says.

“There is going to be competition and we’re not running away from that. But we do think being owned by some of the leading financial institutions in North America gives us the ability to do things a little different.”

As Paze inches closer to its launch, the team has plenty of work on its hands. With ambitions of being accessible to any and every US consumer and merchant, Anderson says the focus is to establish relationships with companies “that can get us access to the mid-tail and the long-tail of financial institutions”.

To entice merchants and issuers alike, build out its network, and sell itself as a feature that comes rolled in with cards and financial institutions, Paze says it will not be charging any fees for at least the next few years.

“We’ve also got to continue increasing our merchant coverage to the point where everybody who accepts cards accepts Paze,” Anderson concludes.