As Mastercard prepares to launch the first phase of its buy now/pay later product, it’s accumulating a network of partners that can help card issuers offer a product that's primarily offered by fintechs.
The bank technology provider Amount, the virtual card-issuer Lithic, the digital card technology provider i2c and the digital-first card issuer Deserve are the latest companies to support Installments. Mastercard first announced it would offer BNPL about six months ago, and the product's debut is scheduled for April.
Mastercard is pushing toward the finish line as several other financial services giants develop broad platforms for BNPL loans. Visa is expanding its own Visa Installments platform to banks, while ACI Worldwide recently announced a platform that will connect many merchants with at least 70 different lenders. These firms are joining fintechs such as Affirm and Klarna that have the biggest footprints in BNPL lending.
“We’re adding more tech resources to create more avenues for banks to enter the ecosystem we’re building with Mastercard Installments,” said Chiro Aikat, Mastercard’s executive vice president of products and engineering.
Walgreens, H&R Block, Bass Pro Shops and Cabela’s also joined the platform this month, along with Sutton Bank. Barclays US Consumer Bank,
In its first phase, launching next month, Mastercard Installments will enable participating banks to give consumers BNPL offers managed within banks’ mobile apps and digital wallets like Apple Pay and Google Pay. Loans will be extended through a virtual, single-use Mastercard.
In the fall of 2022, a “buy” button touting Mastercard Installments is planned to appear on participating merchants’ websites and at the point of sale, inviting consumers to instantly apply and select from a range of instant BNPL loans from different lenders, according to Aikat.
Lenders may offer Mastercard Installments directly, or go through a third party like Amount that specializes in BNPL loan technology, Aikat said. “Through these new partnerships, we’ve created multiple angles for banks of all sizes to get into BNPL,” he said.
Despite intensifying competition in BNPL, Aikat said the majority of shoppers have still not yet tapped BNPL loans, and he expects the consistency and customer service banks can provide through Mastercard for BNPL deals will generate fresh interest.
“Merchants and consumers have run into operational challenges with BNPL loans—how to process returns on items purchased through installment loans, what to do about fraud—and through Mastercard Installments each of these scenarios is easily handled, like with any credit or debit card purchase,” Aikat said.
The Consumer Financial Protection Bureau is currently conducting an inquiry into operations of key BNPL fintechs, and many complaints consumers have filed about BNPL loans to the CFPB centered on confusion over charges for returned merchandise.
One challenge Mastercard Installments faces will be getting consumers to consider new BNPL offers buried in their bank’s mobile apps or digital wallets, said Richard Crone, a principal with Crone Consulting.
“The BNPL market right now is equivalent to impulse credit, and for Mastercard Installments to work, participants will need to educate and motivate consumers to consider other financing options in advance of the purchase,” he said.
Crone is also skeptical about whether BNPL customers, who are typically looking for a deal on a single item, care about the broader protections Mastercard offers for purchases.
“Purchase protection is nice to have, but it’s never been known to move the sales needle,” Crone said.
