FinTech: Mastercard Enters BNPL Fray With ‘Installments’ Product
Mastercard (NYSE: NA) announced Tuesday its launch of a buy-now-pay-later (BNPL) offering that will allow users to pay in four interest-free installments.
Credit cards have a new rival in BNPL, and on Tuesday, global card giant Mastercard announced its own instalments product for the U.S., Australian and U.K. markets. BNPL has become a highly competitive fintech sector marked by extensive deal-making between large companies eager to muscle into the space. (Mastercard)
Consumers can use Installments, the new feature, for online or in-store purchases and pay the amount due in four equal installments payable every two weeks, without any interest charge.
Mastercard’s network will act as a bridge between the selling merchants, the consumer, and the lending agency. In the US the lenders are Barclays US, Fifth Third, FIS, Galileo, Huntington, Marqeta, SoFi, and Synchrony, and with Qantas Loyalty and Latitude in Australia.
The potential of the BNPL market
“The Mastercard Installments program helps merchants scale BNPL offerings to consumers to turn convenience into a competitive advantage,” Mastercard said. “BNPL solutions have been shown to increase average sales by 45 percent and reduce cart abandonment by 35 percent post-implementation.”
BNPL e-commerce transaction value is estimated to be $7.2 trillion by 2025. BNPL solutions have shown a growth rate of 6X in the past two years, and 83% of people that have used BNPL wish it was accepted by more businesses, Mastercard says on its website.
Companies already in BNPL include PayPal, Klarna, American Express, Citi and J.P. Morgan Chase – all offering similar lending products.
However, Mastercard Installments provides global acceptance backed by zero liability fraud protection, not yet available through most current BNPL offerings.
In August, Jack Dorsey-led Square (NYSE: SQ) announced its acquisition of Australian fintech and buy-now-pay-later (BNPL) leader Afterpay (ASX: APT) for $29 billion in an all-stock deal. Later the same month, Affirm (NASDAQ: AFRM) announced it is partnering with Amazon (NASDAQ: AMZN) on a buy-now-pay-later (BNPL) solution.
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