Call It Alt-Credit Or POS Lending, ‘Buy Now, Pay Later’ Just Got Bigger


Installment credit at the digital point of sale has been gathering steam among investors, consumers and providers for the last few years, long before pandemic frugality was a thing.

That alternative method of paying for purchases “on credit” got a boost with news this week that Visa Installments, a new point-of-sale (POS) credit solution, is being rolled out in pilot markets across the U.S. This follows a pilot rollout in Russia last month.

“Given how much the demand for installments is increasing, we are also using the already existing parts of the credit system today to scale installment payments with every [Visa] card across the board,” Cetin Duransoy, Visa’s global head of installment solutions, told PYMNTS.

“With Visa’s installment solutions, our focus is on enabling the enablers and accelerating the direction of our product,” Duransoy said.

Ubiquity for alt-credit hasn’t been a major focus of industry conversation per se, but Visa’s backing of the concept signals that major players have been watching this sector from the sidelines, they like what they see and, at least in Visa’s case, they see it everywhere, and using the already approved lines of credit that issuers have made available to consumers on their credit cards.

Fast and Furious BNPL Action

It’s been a big year for alt-credit, where younger consumers see it as a, well, alternative to using a traditional credit or debit card to finance a purchase. Bolstered by the opportunity to make a purchase and pay for it using a predictable series of equal monthly payments, alt-credit makes the connection between a purchase and paying for it in full that much more tangible.

PYMNTS Provider Ranking of Alternative Credit Apps tracks activity in the space, where the top five players have held steady throughout 2020. Taking it from No.1 on PYMNTS’ Provider Ranking of alt-lenders, Klarna is making waves with its new loyalty program, Vibe.

At the time of the June announcement, Klarna CEO Sebastian Siemiatkowski said, “Vibe members have the freedom to shop everywhere and will enjoy access to unique, tailored benefits from hand-picked partners in addition to exclusive offers, deals and other rewards.”

Klarna also launched its new “Klarna: Swedish for smooother shopping” campaign in June.

Utah-based FuturePay has consistently appeared in PYMNTS’ top 5 alternative credit apps, with its offer of flexible monthly payments for consumers and up-front settlement for merchants.

Silicon Valley FinTech Affirm is also a regular in the top 5 this year. In addition to its core POS lending business, Affirm branched out into financial services in June, debuting a high-yield savings account called Affirm Savings. The account comes with 1.30 percent annual percentage yield (APY), an optional auto-deposit, no fees or minimums, and security as “Affirm Savings is FDIC-insured and accounts are held by our bank partner, Cross River Bank, member FDIC,’” a statement said.

Australia’s AfterPay is having quite a year, with the pandemic driving more than 1 million new users to try buy now, pay later (BNPL) using the platform in the first 10 weeks of pandemic-related lockdowns. In mid-July the company made news again, announcing it will offer its BNPL services at U.S. stores for Google Pay and Apple Pay users.

Afterpay Co-Founder and U.S. CEO Nick Molnar said in a statement that, “Afterpay and Google Pay give shoppers the ability to choose either physical or online shopping while still being able to budget their own money and avoid expensive loans, interest and fees — which has shown to attract new customers and drive more sales conversion for our retail partners.”

Rounding out the top 5 of PYMNTS Provider Ranking of Alternative Credit Apps at present is BNPL player QuadPay. In May, the New York-based FinTech cut a deal with payments platform Stripe, giving consumers more credit to access at checkout.

“Stripe Issuing, which recently launched out of beta, will power QuadPay, which can be used anywhere Visa is accepted, and the option to buy now and pay later tends to boost sales by 20 percent, according to the company,” PYMNTS reported.

Leveraging Risk the Right Way

Not all of the action in BNPL is in the top 5, of course. Minneapolis-based Sezzle raised $55 million in its latest capital round in mid-July, at which time CEO Charlie Youakim said in a statement that “…Sezzle is now in an even stronger position for all of its investors and very well placed to accelerate its growth strategy and undertake investment in initiatives to drive long-term value creation.”

Alt-lending is not only the right service at the right time, but it also uses existing data and relationships to create digital efficiencies that are strengthening BNPL’s proposition and in the case of traditional credit providers, the underwriting and risk management capabilities of issuers.

As PYMNTS reported on the Visa Installments news, “The Visa installments program will offer consumers an ability to tap into an installment plan experience at the digital POS using their already established credit line on their Visa credit cards.”

Visa’s Duransoy said, “Issuers already have a longstanding track record of handling consumer risk. With [Visa Installments], what we are basically saying is: ‘Hey, they already know how to handle that specific consumer’s risk. And they’re in the best position to make that decision without requiring any application or additional evaluation.’”