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?
As competition in the payments ecosystem is riling up between traditional and challenger banks, reshaping core systems and technologies of traditional banking is long overdue. When talking about future-proofing banks and financial services, the term Banking-as-a-service is starting to come up a lot. But what is banking as a service all about and how is it reshaping the industry?
Apple’s push to secure a spot in the payments ecosystem is still going strong. Or at least that’s the plan — executing on it may be … well, not that simple. This is because Apple has been making moves to build a network of merchants, among the most critical components of the payment value chain … with functionalities that are already out there in the market.
If you’ve even moderately kept an eye on any payments related news source, there’s no way you have not been bombarded with the Buy Now Pay Later craze in 2021. Almost all the widely known payment players in the field who could partake in the BNPL craze… actually did. We are quite sure that you have heard about the likes of; Klarna, Affirm, and Afterpay, but industry Giants such as Mastercard, Paypal, Visa, Square, Monzo, Revolut, Amazon, and even Walmart, are all offering BNPL options at checkout or are partnering with BNPL companies to offer this service to their customers. Even mighty Apple is climbing aboard.