Mastercard’s Aikat: Installments Program Helps SoFi Tailor BNPL to Member Needs

BNPL’s appeal for merchants lies in increasing basket size amid a pressured macro environment.

Mastercard’s Chiro Aikat told Karen Webster that BNPL’s momentum has been underscored by SoFi’s rollout, announced earlier this month, of its BNPL product. SoFi is the first bank to launch within the Mastercard Installments program, enabling its members to access installment payment options for qualifying purchases at checkout, both in-store and online.

The new deployment, said Aikat, executive vice president of U.S. Market Development, is a step toward driving scale and global acceptance for buy now pay later (BNPL). Mastercard announced its Installments program back in September 2021.

As Aikat told Webster, the SoFi linkup comes as consumers have been demanding that payment option, but there had been technological “gaps” in enabling firms to offer BNPL. With a nod to the open banking component of the program, he said that with improved consumer-level data (given with the consumer’s consent), the lenders are better able to understand customers’ cash flow and debt — and can make the appropriate, tailored lending decisions.

In terms of the mechanics of Mastercard Installments, the payments network detailed that a bank or FinTech preapproves a variety of BNPL offers that allow consumers to split up payments, including the SoFi Pay in 4 installments, an interest-free option. The funds can be stored in a digital wallet or used at checkout but without the need for a new card. The installments offering is accepted across the network and also has the security of zero liability protection.

Burgeoning Demand

Indeed, as PYMNTS/Amount joint research has shown, trust is a critical component in BNPL — and trust is the most important factor cited by more than 53% of consumers in choosing their short-term credit providers. Moreover, 70% of BNPL-using consumers say they’d be interested in using BNPL from their banks if such offerings were made available.

For the SoFi rollout, qualifying purchases range from $50 to $500 and are limited to larger ticket items, not everyday spending in categories such as groceries. Pay in 4 cannot be used for everyday purchases in categories like groceries, restaurants, bars and gas stations; it is meant for larger purchases like flights, hotels, electronics, clothing, home improvement and other retailers.

The first payment is due at the time of purchase and can be pulled from the member’s SoFi checking account, while the remaining payments are due every two weeks. Members will be prompted to set up autopay from their SoFi checking account.

In this way, he said, BNPL becomes an adjunct to, not a replacement for, debit or credit card spending.

For larger-ticket items — say, for a Peloton exercise bike — consumers find value in splitting those transactions into monthly, predictable payments rather than taking the whole transaction onto a card. One might liken the installments functionality to the digitization of layaway, he said, with the caveat that the goods are delivered at the moment of purchase.

Aikat pointed out that the parameters of the SoFi initiative show that Mastercard has designed the Installments technology “in a way that lets the lenders and issuers limit, or drive, which MCCs they want to go after.”

Looking ahead, he said there’ll be more announcements of financial institutions (FIs) and lenders offering BNPL to their respective markets and customer bases.

“These institutions are going to want to take advantage of a new way of paying — and this is just the start of a journey that we’ve been on for the past year and a half,” he told Webster.