Mastercard jumps into buying now, pay for space later in a big way

As the buy now, pay later (BNPL) market heats up, Mastercard (MA) is stepping into the fray with a new product offering.

The credit card giant on Tuesday announced “Mastercard installments” for the US, Australian and UK markets, offering consumers a four-installment payment model at 0% interest similar to other BNPL players in the industry.

As more established companies like Mastercard enter this space, launching new products, through partnerships or through acquisitions, “we expect that buy now, pay later will become ubiquitous, fair account. given the usefulness it has demonstrated over the past year or so, “said Mark Palmer, analyst at BTIG, in an interview with Yahoo Finance. “I believe it’s inevitable that ubiquity will be the end of the game… what we’re seeing now is just one more step in that direction.”

Mastercard users can use the BNPL service at more than 70 million merchants through their lender’s mobile banking app or through instant approval at checkout, according to Mastercard. Pre-approved payouts can be used directly on a company’s website and can also be stored in digital wallets.

BNPL users will also benefit from consumer protections built into the product, such as zero liability fraud protection and the ability to dispute unrecognized claims.

Mastercard will work with Barclays US (BCS), Fifth Third (FITB), FIS (FIS), Galileo, Huntington (HBAN), Marqeta, SoFi (SOFI) and Synchrony (SYF) in the United States, and with Qantas Loyalty and Latitude in Australia on the BNPL program.

The “increasingly blurred” line between BNPL and credit cards

Bank of America analysts previously noted that the BNPL model “is attacking and disrupting the traditional credit card industry.” And while the amounts spent are comparatively lower, “the industry is rapidly gaining market share.”

Splitting payments – as opposed to bulk purchases on credit cards that would accumulate interest until paid – is based on the premise that there is a “shift from credit to debit,” Nicholas Molnar, co-founder and US CEO of Afterpay, previously told Yahoo Finance.

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“Buying now, paying later is an attractive alternative to using credit cards, especially for those without access to credit or [are] just not interested in using credit cards, ”Palmer said.

The BNPL marketplace is increasingly crowded as more established names attempt to gain further foothold in BNPL’s emerging payment model. Visa (V), for example, offers a service similar to Mastercard.

In August, Square (SQ) announced a giant $ 29 billion deal to buy Australian operator BNPL AfterPay. Amazon (AMZN) has also entered the space by partnering with Affirm (AFRM), an American actor.

Swedish payment firm Klarna, previously valued at $ 46 billion, and Affirm have also made deep inroads into the BNPL market over the years, as has PayPal (PYPL), which offers the four-install payment option. And Bloomberg reported that tech giant Apple (AAPL) is also working on a BNPL offering in partnership with Goldman Sachs.

Palmer said he expects the general trend for BNPL to be part of a wider range of offerings from established players, such as PayPal and Square.

“So we’re not surprised to see credit card networks getting involved in this regard,” he added, “simply because buying now, paying later is an alternative to traditional credit cards. and helps to complete this offer “.

As for stand-alone BNPL companies that remain like Klarna, Palmer felt they could become an acquisition target, “or they will build their own great apps because … buy now, pay later won’t be the goal or the singular objective of a company in the future, it will be a function in a larger context. “

Either way, with Mastercard’s entry into the space, “the line between credit cards and buy now pay later is becoming increasingly blurred,” said Ted Rossman, senior industry analyst at CreditCards. com, in a press release.

Rossman added that BNPL “is set for another banner holiday season, extending last year’s e-commerce gains and deepening the in-store experience.”

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Aarthi is a reporter for Yahoo Finance. She can be contacted at [email protected]. Follow her on Twitter @aarthiswami.

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