Capital One Halts BNPL Transactions On Its Credit Cards

Capital One Financial Corp (CapOne) is putting a stop to buy now, pay later (BNPL) transactions on its credit cards, calling the dealings “risky,” Reuters reported on Monday (Dec. 7).

A spokeswoman for the third largest credit card company told Reuters that it will stop taking “transactions identified as point of sale loans charged on its credit cards, regardless of the point of sale lender. These kinds of transactions can be risky for customers and the banks that serve them.” The news outlet noted it is the first lender to distance itself from BNPL as a financing alternative.

BNPL transactions allow users to pay for merchandise across several installments interest-free, while also paying the retailer in full at the time of the sale. Customers who use their debit cards or checking accounts can still make BNPL payments, the CapOne spokeswoman said.

The sector, which includes Australia’s AfterPay, Sweden’s Klarna, Canada’s Affirm and others is exempt from consumer credit laws in most regions of the world. BNPL firms get a commission directly from merchants; interest-free installments are generally limited to four.

Afterpay topped $2 billion in November sales, more than double its sales during the same period in 2019. Active users on the platform reached 13 million in the U.S., with about 1 million new users added, along with numerous new retailers.

A PYMNTS survey done in conjunction with PayPal discovered that shoppers liked the BNPL so much, it is a factor in deciding where to shop. It also found that that millennials — born between 1981 and 1996 — are especially enthusiastic about shopping with the option of BNPL transactions.