Mastercard (MA) on Tuesday said it would launch a buy now pay later service in the U.S., Australia and the U.K., making it the latest large payments company to allow customers to pay for purchases in installments. Mastercard stock fell.
The move will allow the credit-card giant to offer more flexible, interest-free payment options online and in stores. Those options have become more popular among younger customers — particularly millennials and Gen Zers — who are suspicious of more traditional credit options.
The company said the buy now pay later services — also known as BNPL or point-of-sale loans — would also steer more business to lenders, fintech companies and wallets looking to offer more payment options to customers. Mastercard said it plans to offer the buy now pay later option, called Mastercard Installments, to other markets in the future.
Mastercard said it would work with a variety of financial firms to make the service work in the U.S.: Barclays US, Fifth Third (FITB), FIS (FIS), Galileo, Huntington (HBAN), Marqeta (MQ), SoFi (SOFI), and Synchrony (SYF).
In Australia, Mastercard said it would work with Qantas Loyalty and Latitude.
Mastercard Installments allows customers online access to buy now pay later offers that are either pre-approved through a lender’s banking app or instant approval during checkout, the credit-card company said in a release. Pre-approved installments can be used on a merchant’s website and stored in digital wallets.
‘Changing Consumer Spending’
Buy now pay later options generally allow customers interest-free payments on purchase, often spread out over a few months. Customers can avoid late fees if they pay on time. More customers took to BNPL options amid the digital adoption driven by the coronavirus pandemic.
“Fueled by changing consumer spending habits during the pandemic, BNPL adoption continues to accelerate globally,” Mastercard said. “In addition to consumer demand, the momentum is being driven by issuer and merchant desire to deliver new, complementary ways for consumers to shop both in-store and online.”
Other large payment companies have also tried to capitalize on the popularity of buy now pay later options.
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