Mastercard Joins An Increasingly Crowded BNPL Field With the Debut Of Mastercard Installments

Mastercard Inc. joined the BNPL fray Tuesday with the introduction of Mastercard Installments. Consumers can access BNPL offers, either pre-approved through their lender’s mobile banking app or through instant approval at checkout, that can be used online or in-store wherever Mastercard is accepted.

Consumers can choose from a variety of installment options, including a zero-percent interest or a pay-in-four model, and will have full transparency on lender practices during the approval process, Mastercard says. The service is set to roll out first early next year in the United States, the United Kingdom, and Australia.

To differentiate its BNPL offering in an increasingly crowded field of players, Mastercard is offering consumers using Mastercard Installments zero-liability fraud protection on each purchase and the ability to challenge unrecognized charges on their account. 

On the merchant and acquiring side of the equation, Mastercard Installments is being embedded in the core Mastercard network, which eliminates the need for mobile wallet and BNPL providers to build direct-settlement arrangements with merchants or acquirers. Digital wallets and BNPL players can easily integrate Mastercard Installments’ application programming interfaces, Mastercard says.

Mastercard’s entry in BNPL follows that of rival Visa Inc.’s entry into the market in August.

“The line between credit cards and buy now pay later is getting increasingly blurry. For example, Mastercard’s new offering works with digital wallets and on retailers’ Web sites. At the point of sale, the consumer experience has a lot in common whether the customer chooses to pay with a credit card or buy now pay later,” Ted Rossman, senior industry analyst for CreditCards.com, says by email. “Ultimately, these are similar payment methods that offer people flexible repayment terms. Many consumers are drawn to the instant gratification, easy access, and predictable installments.”

Not only has BNPL become an increasingly popular payment service with consumers during the Covid-19 pandemic, it has also gained a reputation for being a sure-fire way for merchants increase sales. Offering a BNPL option increases average sales by 45% and reduces cart abandonment by 35% post-implementation, Mastercard says.

“Buy now pay later companies have done a great job selling their solutions to merchants. Even though they generally charge higher processing fees than credit card issuers, buy now pay later companies have gotten merchants to buy in on a narrative that they sell more stuff when they offer buy now pay later to their customers,” Rossman says. “Buy now pay later is poised for another banner holiday season, extending the e-commerce gains from last year and pushing deeper into the in-store experience.”

The rollout of Mastercard Installments also builds on the card network’s investments in open banking, which allows third-party financial-services companies to access a consumer’s personal financial data, with the consumer’s permission, via an API. BNPL lenders, for example, can view a consumer’s transaction history at the account level as part of the underwriting process. Open-banking technology also provides consumers choice of how they will pay the BNPL installments, such as a debit to their checking or savings account, using a Mastercard debit card, or another payment product.

“At the heart of it, payments come down to choice—and people want more from their money with greater flexibility and control in how they pay and where they shop,” Craig Vosburg, chief product officer for Mastercard, says in a prepared statement. “Mastercard Installments has been built on our guiding principles to protect consumers and enable choice without sacrificing trust and security. It is a digital-focused way to pay today and tomorrow, delivered through consumers’ most trusted relationships with their banks and other lenders, at merchants of their choice.”