Mastercard buys Vyze to get ahead of the POS financing market

By Mastercard’s own reckoning, the point-of-sale financing space is a $1.8 trillion market in the U.S. alone, making its Vyze acquisition a natural way to pursue an opportunity that’s being gobbled up by fintechs and card alternatives.

The Austin-based Vyze lives in a market that includes Affirm, Splitit, PayPal and myriad others that offer what amounts to “card avoidance,” or the ability to finance a purchase at the point of sale with simpler terms than the rolling credit model of credit cards.

Vyze connects merchants with multiple lenders, giving those stores the opportunity to offer a range of online and offline financing options. These options will complement Mastercard’s existing card and ACH-based options, the card brand said in a release, attributing its $1.8 billion addressable market size valuation to Accenture.

Vyze’s own website is filled with links to stories about how consumers are avoiding credit cards, or how younger consumers are “moving away” from traditional payment options. Visa has already made its play in the market with a strategic investment in Klarna, a Swedish fintech that offers point of sale financing and has designs on the U.S.

The point-of-sale financing model has traditionally been more popular in Europe than in the U.S., though there are signals of a potential opportunity in the U.S. that’s drawing attention from developers and investors, with funding closing in on $1 billion over the past year, according to CBInsights. Square has added point-of-sale financing to its merchant services mix, and Affirm just raised a fresh $300 million in funding to add scale and talent.

"POS financing is growing in recognition of changing demographics, and how customers use payment products," said Zil Bareisis, a senior analyst at Celent, noting merchant services companies are increasingly collaborating to add POS financing to their product lines, with European fintech Mash's recent partnership with Verifone and Nets being an example. "Two things are happening now. Banks are joining in, and instant credit is moving to the physical point of sale."

These investments threaten traditional banks and credit cards by providing a way for merchants to engage consumers with a mix of marketing and payment flexibility that doesn’t rely on the card network’s rails.

Writing for PaymentsSource, Nufar Segal Bareket, a general manager at retail technology company Jifiti, said traditional financial services companies are losing ground in the point of sale market by viewing fintechs as adversaries rather than partners.

Terms of the Vyze deal were not disclosed, and Mastercard did not return a request for comment by deadline. The card brand also hopes to extend its appeal to both merchants and lenders by improving the overall checkout experience and enhancing security. Vyze’s API connects merchants to a single source to support different lending options, theoretically removing the need for merchants to manage a range of consumer payment and financing choices.

Mastercard has made other recent moves to shore up its ability to offer flexibility and an easier experience to merchants and lenders. It’s embedding incentive marketing for World and World Elite cardholders with specified merchants to enable automatic redemption. The card network is also preparing to launch an interoperable ID product later this year and is pushing for cross-industry cooperation among businesses and governments.

Mastercard and the other card networks have also pushed a standardized "buy button" for online purchases. Mastercard also acquired Transfast to boost its ability to offer cross-border payments, a necessity as more e-commerce merchants sell internationally.

In this way, the strategy is similar to other existing companies such as FIS and Fiserv that face pressure from younger, more nimble fintechs, and are turning to the M&A market to offer a broader range of services for both merchants and banks.