Paze, a PayPal and Apple Pay rival to major banks, has high expectations

Paze, a digital wallet for online checkouts from Early Warning Services, the consortium of banks behind Zelle, hopes to make a splash in the payments world.

The platform, which is designed to “solve key pain points in the online shopping experience,” allows credit and debit cardholders to combine their cards into one digital wallet, the company said Tuesday. As an added security measure, Paze also tokenizes card numbers so that merchants do not receive card information.

The platform is now available to 125 million credit and debit cardholders at Bank of America (BAC)Wells Fargo (WFC)JPMorgan Chase (JPM)Capital One (COF)PNC (PNC)Truist (TFC)and American Bank (USB) – the seven banks behind Early Warning.

The announcement comes as major banks try to fend off competition from digital wallets and online payment providers like Apple Pay (AAPL) and PayPal (PYPL). Apple in particular has that red flags raised for banks as they delve deeper into consumer financing.

In 2023, more than half of Americans used digital wallets more often than traditional payment methods, while 64% used them at least as often, according to research from Capital One Shopping. Apple Pay is the most popular digital wallet worldwide, with a 92% market share from last year. In the US, PayPal was the most popular digital wallet, used by 71% of US adults.

Catherine Murchie, head of operations at Paze, told reporters that Paze’s key differentiator is its focus on privacy, giving consumers the ability to keep their information within their own financial institution without having to share card data with merchants or other third parties.

“Convenience is very important to us and safety is also very important,” Murchie said. “But what drove us to create this solution was the importance of a bank-backed solution – one that consumers could use and that was backed by the trust of their financial institution.”

She said more banks are expected to become part of the program later.

Paze has been in the making for years, with The Wall Street Journal first report plans to introduce it in January 2023. Minneapolis-based US Bank was the first to roll out the platform publicly early September.

Eligible customers can activate their Paze digital wallet through their bank’s mobile app or at checkout at a participating online retailer.

But the platform is also designed for retailers. Major companies offering Paze include ShopRite, small business sites built with GoDaddy (GDDY)and Sephora – the latter of which added the option to use Paze at checkout for loyalty members in late August. Murchie said more merchants are also in talks to offer Paze at checkout.

“Easy online checkout is becoming critical as more customers move to a digital shopping experience,” said Cameron Fowler, CEO of Early Warning, in a statement.

Early Warning also mentioned Serge Elkiner, former Global Head of Product for Money Movement Solutions at Visa (V)as general manager.

“We are proud of our achievements to date, but this is just the beginning for Paze,” Fowler said. “I look forward to having Serge drive adoption by consumers, publishers and merchants in the US”

Paze will operate separately from its sister company Zelle, which is used to send and receive money transfers, much like Venmo or CashApp (SQ). Early Warning has grown Zelle into a sprawling company since its launch in 2017, with 120 million consumer and small business user accounts and Transaction volume of $806 billion in 2023 – an increase of 28% compared to a year earlier.