Capital One Eyes Testing BNPL Waters With POS Offering

Capital One will be testing out a buy now, pay later (BNPL) product as consumer loans see rising competition, Reuters reported.

FinTech firms have been enabling merchants to offer cheap financing for purchases, the report stated.

The company’s test BNPL product will come with point-of-sale (POS) loans for a limited set of merchants Capital One has already worked with, according to CEO Richard Fairbank, per the report. He said the company will analyze test results to see exactly how the products are doing and how they can appeal to merchants and consumers.

BNPL’s popularity is due to venture capitalist support and merchants willing to subsidize the interest costs Fairbank said, per the report. The growth is not being taken lightly.

“The elephant in the room is the sustainability of the merchant subsidy,” Fairbank told Reuters. “This is fueled by merchants’ beliefs that they’re getting incremental volume.”

A worry with BNPL services is that they could potentially harm a rebound in lending revenue for those using credit cards for borrowing, according to the report.

Customers have made a practice of paying down credit card balances for the past year and a half amid the pandemic, getting rid of interest charges. Some of them have been tempted to use BNPL to buy items, but they then fall behind on payments, boosting the interest charges, the report stated.

In other BNPL news, the earnings for numerous companies like Affirm, Afterpay, PayPal and others have shown the vitality of BNPL. PYMNTS estimated that around 29 million Americans have made use of BNPL services to pay for at least one item in the past 12 months.

Read more: Affirm, Afterpay, PayPal Earnings Show BNPL’s Explosive Growth and Potential

Affirm has seen its revenue shoot up 71%, for example, while Afterpay is being bought by Square and posted double-digit growth.