September 24, 2020

Mastercard Delves Deeper Into BNPL Space With Global Payments

Mastercard Inc. MA has partnered with Global Payments Inc. GPN subsidiary Total System Services(TSYS) to help issuers and merchants in North America provide flexible payment options to its cardholders.

The partnership will aid customers holding Mastercard cards to break up the payment for their purchases into parts or installments. There will also be an option to avail of this facility before, during or after the checkout.

TSYS, a leading provider of processing and supporting services for the commercial card portfolio of several banks, is a perfect fit to enhance Mastercard’s buy-now-pay-later (BNPL) ecosystem. BNPL is a payment solution, enabling customers to choose a financing plan and pay in installments instead of paying the entire cost upfront for their purchases.

The BNPL feature gained demand on a rapid escalation in e-commerce following the COVID-19 outbreak. BNPL is a win-win proposition for all the parties involved in a transaction, such as consumer, merchant as well as the issuing bank.  The consumer gets the option to buy stuff that were their layaway targets, merchants  might see higher sales closure and get an opportunity to upsell the customer. The issuing bank thus benefits from increased spending.

Mastercard eyes the BNPL space as a huge market opportunity and is penetrating it more. Per the company’s research, nearly three-fourth of consumers interested in installments prefer the feature to be added to their existing card. Also, three of four Americans who tried the installment plans for the first time during the pandemic intend to continue doing so after the coronavirus dies down. This reflects customers’ growing desire for such solutions.

To make it big in the BNPL space, last year, Mastercard acquired Vyze, which is a digital commerce and payments matchmaker that collaborates with lenders and merchants, enabling them to offer installment loans to consumers who are buying those merchants’ products.

Mastercard also provides a comprehensive suite of BNPL offerings, which includes Pre-sale, Point of Sale and Post-Sale. Customers can access these varied options to decide how they can manage their finances and expenses.The company forged alliances with QuadPay, Fly Now Pay Later, Jifiti, Splitit, Divido and Pine Labs to provide BNPL services worldwide. BNPL is a kind of Point of Sale (POS) financing, creating pool of opportunities for consumers to make hassle-free payments. Per an Accenture figure cited by Mastercard, the industry boasts a $1.8-trillion worth market value. Thus, this space remains largely untapped.

The world of POS financing is expanding. Per Mastercard, the market is growing at an annual rate of 20% and therefore this space is attracting players in hordes.

Last year, Visa Inc. V, which is one of the major players in the payments industry announced that it will tie up with banks and merchant clients to pilot an installment payment solution starting January 2022.

Another entity PayPal Holdings, Inc. PYPL recently announced its foray in the BNPL space by offering  a payment product named Pay in 4,  which will let customers pay for any item priced between $30 and $600 in four installments within six weeks.

Square Inc. SQ also offers Square Installments that allows small business clients like hairdressers, car parts sellers, et al to offer payment flexibility in installments to their customers.

Year to date, the stock has rallied 20.8% compared with its industry’s growth of 10.9%.

Mastercard currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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