We’re sure you have heard about the likes of; Afterpay, Klarna, Alma, Clearpay and many more, because they seem to be everywhere when you are shopping online, or browsing FinTech news. One might even argue that the explosive popularity of this controversial payment method, is threatening to chip away at the dominance of credit cards in payments
But payments powerhouse Mastercard has kicked off its fightback against the competing buy now, pay later providers, with the launch of “Installments”. This article addresses the biggest issue with Mastercard’s newest program and its role in the company’s open banking strategy
The Buy Now, Pay Later sector got a boost during the pandemic as cash-strapped shoppers were attracted to the service. This because of the ease of making part-payments for their shopping and even for travelling, which we covered in our previous episode on “the rise of travel now pay later”.
Buy Now Pay Later can help sales soar by up to 45% while simultaneously powering a 35% decline in shopping cart abandonment.
Some of the biggest entrants to the space in 2021 include Square, after acquiring Afterpay in a $29 billion deal. Let's also not forget that Paypal is acquiring the Japanese buy now pay later firm Paidy in a $2.7 billion deal. According to Reuters.
Also worth noting is that sources are reporting that Apple and Goldman Sachs are working on their own Buy Now Pay Later offering.
And last but certainly not least, Visa has been rolling out Buy Now Pay later APIs for clients as well. Under this program, VISA has set up a website providing its credit card issuing partners with APIs to develop and pilot their own instalment payment programmes.
As for the program itself, it seems like a typical Buy Now Pay Later solution where consumers can pay for online and in-store purchases by ways of interest-free installments. So if you are a consumer from the US, Australia or the UK, you can benefit from this solution.
Mastercard Installments builds on Mastercard’s investments in open banking which help deliver a simple and convenient experience for consumers, merchants and lenders.
Crucially, Mastercard is deploying Open Banking technology through Finicity in the US and its pending acquisition of Aiia in Europe to use consumer permissioned data tied to debit or bank account credentials to handle the risk assessment process.
If you want to learn more about Mastercard’s open banking strategy, don’t miss out on reading our recent interview with Jan-Willem van der Schoot, Country Manager at Mastercard Netherlands where we take a dive deep into the challenges and future plans for open banking.
We believe that Mastercard has the capability and resources to provide an outstanding solution. The only issue is that card issuers might not be able to handle such functionality yet due to legacy systems, hene we are curious to know how much Mastercard will assist its card issuers in deploying this offering, and whether they will offer stand-in processing. Because if they do, then we can see the barrier to entry for merchants becoming extremely low.
Finally, Looking at this rather saturated market, we can’t help but wonder:
what value will Mastercard have to add to make a dent in the BNPL market?
Mastercard has been under heat after it was announced that they will sharply increase interchange fees post-Brexit, revealing the power of credit card duopoly. Let's look at what caused this increase and how it could affect both merchants and buyers.
Cryptocurrency has been a hot topic in a number of recent news reports insert popups of news reports, and we’re seeing an increasing number of issuers and banks making efforts in expanding digital currency roadmaps. This article covers Visa’s crypto API pilot and the possible effects of this initiative.
Buy now, pay later pioneer Klarna is launching its own banking accounts in Germany. Klarna was already a bank as the holder of a Swedish banking license, but without fully playing the "Bank" role in Europe. This is a remarkable step and certainly a big challenge for challenger banks!