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09/28/2021

Mastercard enters the ‘buy now, pay later’ arena

Dan Berthiaume
Senior Editor, Technology
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Mastercard
Mastercard is entering the BNPL space.

The rapidly growing market for “buy now, pay later” (BNPL) flexible installment payments is gaining a major new entrant.

Global payments technology company Mastercard is rolling out Mastercard Installments, a program that will give banks, lenders, financial technology companies and digital wallet providers the ability to offer BNPL payment options at retailers with flexibility across the entire acceptance network.

The new offering gives consumers a flexible means of paying online and in-store through equal, interest-free installments, with seamless integration into Mastercard’s network. It enables banks, lenders, fintechs, and wallets to offer a variety of flexible installment options to consumers - including a 0% interest, pay-in-four model – without complex integration into the merchant infrastructure.

Leveraging Mastercard Installments, consumers can gain digital access to BNPL offers, either pre-approved through their lender’s mobile banking app or through instant approval during checkout. Pre-approved installments can be used directly on a retailer’s website, and can be stored in digital wallets including Mastercard Click-to-Pay, to then be used online or in-store wherever Mastercard is accepted.

Instant approvals during checkout will be available through Click-to-Pay shortly after launch. Consumers will have full transparency on lender practices up-front during the approval process, along with zero-liability fraud protection and the ability to challenge unrecognized charges.

BNPL is growing rapidly, both in terms of its usage by consumers and in the number of retailers and other entities offering BNPL services. According to a recent study from Juniper Research, spending via BNPL services which are integrated within e-commerce checkout options, including fixed installment plans and flexible credit accounts, will reach $995 billion in 2026, up from $266 billion in 2021. As a result of this dramatic increase in BNPL usage, by 2026 BNPL services are expected to account for over 24% of global e-commerce transactions for physical goods by value, from 9% in 2021.

In addition, recent eMarketer data reveals 45.1 million U.S consumers ages 14 and older will use a BNPL platform in 2021, up 81.2% year-over-year. This represents 21.5% of digital buyers in the US. By 2025, the figure will grow to more than one-third. Younger consumers are driving adoption of flexible payments, eMarketer said. Millennials account for 42.7% of BNPL, followed by Gen Zers, which account for 30.3%.

Numerous retailers have begun partnering with BNPL providers in the past year. Most recently, Walmart reportedly replaced its layaway program by expanding an existing BNPL partnership with financial products and services company Affirm.

Mastercard Installments will first come to market in the U.S., Australia, and the U.K. Mastercard will work with Barclays US, Fifth Third, FIS, Galileo, Huntington, Marqeta, SoFi, and Synchrony in the U.S., and with Qantas Loyalty and Latitude in Australia, on its BNPL program.

“At the heart of it, payments come down to choice – and people want more from their money with greater flexibility and control in how they pay and where they shop,” said Craig Vosburg, chief product officer, Mastercard. “Mastercard Installments has been built on our guiding principles to protect consumers and enable choice without sacrificing trust and security. It is a digital-focused way to pay today and tomorrow, delivered through consumer’s most trusted relationships with their banks and other lenders, at merchants of their choice.”