Mastercard Installments Brings New Network of Lenders and Instant, Turnkey BNPL to 78M Merchants

Giving consumers more payment choices is the key to merchants making sales they might otherwise have missed, and more times than not lately, the bridge to those sales is being made possible by growing use of buy now, pay later (BNPL).

While PYMNTS’ research has pegged domestic usage of BNPL at about 14% of online shoppers, or roughly 29 million consumers across the U.S., that uptake is still far from being available at scale, let alone approaching anything remotely close to ubiquity.

Read also: 14% of Online Consumers Have Used BNPL

Amidst this burgeoning yet still limited backdrop, a new BNPL program from Mastercard is set to exponentially broaden the point of sale (POS) installment lending landscape for consumers and merchants by creating a whole new class of lenders to enable it, Installment Program Providers (IPP) anywhere Mastercard is accepted. Barclays US, Huntington National Bank, FIS, SoFi, Marqeta, Synchrony and Lattitude Financial are among those named by Mastercard as participating in the Mastercard Installments launch.

Powered by open banking (through Finicity in the U.S. and a pending acquisition of Aiia in Europe), the IPPs — running the gamut from FinTechs to lenders to digital wallets to banks — will tap Mastercard’s merchant acceptance network that spans 78 million enterprises, both large and small.

That direct connection will also use consumer permissioned data tied to debit or bank account credentials to provide what might be termed “smarter” loans — where insight into cash flow can determine repayment terms, underpinned by responsible underwriting, Mastercard Chief Product Officer Craig Vosburg told Karen Webster.

Mastercard Installments integrates directly into the merchant network, eliminating the need for lenders to integrate with merchants’ infrastructure one at a time, connecting on the back end to those enterprises to run credit checks and set up the BNPL plans.

Super Seamless

As detailed in the company’s Tuesday (Sept. 28) announcement, the Mastercard Installments BNPL program will be through virtual cards accepted anywhere Mastercard is accepted. For that reason, merchants will be able to accept Mastercard Installments payments from any lender without changing anything at the point of sale or any aspect of their current payment flows. Acquirers have a modest software upgrade to enable merchants to connect to the network.

Consumers will be able to finance goods and services at the point of sale through equal, interest-free installments — known as “pay in four” — without wielding debit, credit or prepaid cards.

The BNPL offers are pre-approved through the lender’s mobile app or through instant approval during checkout. Vosburg told Webster that the pre-approved installments are accepted at the merchant POS and can also be stored in digital wallets.

Post-launch, Mastercard said it would include instant underwriting and instant issuance at the point of sale as part of Click to Pay. Pre-approved BNPL offers will come through “issued credentials” that can be redeemed when the consumer wants.

See also: Exclusive: Citi Enables Mastercard’s Click to Pay At Checkout For Cardholders

Among the businesses partnering with Mastercard on the program is the consumer financial services company Synchrony.

“Mastercard’s enablement of BNPL offerings across their network will further empower merchants and consumers with access to a greater variety of payment options,” said Synchrony Chief Growth Officer Michael Bopp in a statement.

Initial rollouts will be in the United States, Australia and the United Kingdom and will see the BNPL functionality embedded directly into the payments network across multiple rails. The benefits to the merchants (who can opt out of Mastercard Installments) are significant. When offering BNPL, studies have shown sales can soar by up to 45% while at the same time powering a 35% decline in shopping cart abandonment.

Consumer desire for alternative ways to pay and manage their money through offerings like Mastercard Installments prompted personal finance company SoFi to participate.

“The demand for a new way to pay via BNPL within a debit account like SoFi Money is clear; SoFi is thrilled to be deepening its partnership with Mastercard to bring this technology to life,” said SoFi CEO Anthony Noto in a statement.

The Mastercard Installments program comes a bit more than a year after Mastercard announced that it had partnered with TSYS to offer installments, with integrations available via application programming interfaces (APIs), tied to the consumer’s existing credit. The new Mastercard Installments BNPL exists as a separate program, operating more like a “pure-play” BNPL platform.

Read more: Mastercard, TSYS Team To Expand Installment Payment Offerings

A New Class of Lender

Mastercard is taking a page out of its network of networks strategy by broadening the definition of the BNPL lenders themselves. Vosberg said that digital wallets, for example, can become part of the Mastercard Installments platform and deploy the solution to consumers and already integrated merchants, which broadens the BNPL ecosystem and offers consumers more payments choice.

Vosberg said Mastercard Installments is anchored on responsible lending principles, underwriting with as much insight as possible while understanding of consumer’s ability to repay.

“The cash flows that are visible through the open banking connection enables credit to be extended to more consumers by enabling that credit to be extended safely,” he said.

Vosburg maintained that the fee structure paid by acquirers is competitive with existing BNPL programs already in the marketplace where the costs are shared by the lender, the acquirer and Mastercard as the transaction enabler.

Zero Liability Fraud Protection

Vosburg also said that consumers using virtual Mastercard-branded cards would benefit from zero-liability fraud protection when transacting with a lender that is part of the Mastercard Installments network. Mastercard fraud tools and capabilities available to the lenders will help with account opening verification, while disputes and chargebacks can be managed more effectively with Ethoca.

He maintained that at least initially, a significant percentage of BNPL loan repayments will be made through Mastercard debit cards on the back end. When BNPL is linked to Mastercard payment vehicles, he said, consumers get more ways to pay for things with money they already have in hand, making it easier for merchants to close the sale.

“There are real benefits in this for every player in the system, for the consumer, for the merchant — and with access to more purchasing power with zero lift on their part or the lender’s part to be able to meet the needs of a broader range of customers,” he added.