BNPL – Mastercard Goes Full Throttle

Mastercard Rolls Out BNPL Assault in USA, UK and Australia

Mastercard enters the key online markets of USA, UK and Australia with a BNPL virtual card supported by some of the biggest global processors. Names like FIS, Marqeta, Huntington and Synchrony will get attention as will Barclays in the UK.

Not hard to work out who Mastercard is targeting - Paypal, Klarna, Affirm and Afterpay Australia ( not to be confused with the original Afterpay Europe).

Fair to say this is aimed at existing banking customers but along with all the other activity it’s bound to make a splash. No confirmation of the 80 bps interchange rate already I use in a number of markets which changes the profitably dynamics.

Key activity in the last 30 days in BNPL:

- Facebook launches mobile wallet in US - direct threat to PayPal and Square/Afterpay

- PayPal discards late fees in all global markets - direct threat to 20% of BNPL revenues. 

- Amazon trials Affirm in USA, limited number of (younger) consumers and only at payment gateway  – potential threat to USA BNPL apps.

- CBA's StepPay hits the market - initial results appear to be very good, 168,000 on wait list - CBA have 4 million customers in Australia plus ASB in NZ.

- Big losses reported by Afterpay, Klarna and Zip, over $1.1 billion - Zip especially will run out of cash within 7 months - not sure what market expected?

- OpenPay - auditors qualify accounts - they are on a knifes edge and will need cash urgently. 

- Payright - very bad results with both credit losses and expenses. 

- Splitit – Loss doubles and CEO departs.

- Sezzle – Credit losses increase, loss widens and doubtful debt provisions double to nearly half revenue.

- Suncorp Australia launches Visa BNPL.

- Facebook Australia launches ‘Facebook Pay’ service linked to customers debit/credit card or PayPal – yet another competitor for small transactions.

- PayPal buys Japanese BNPL company Paidy US$2.7 billion – buying 6 million users and 700,000 merchants

- Affirm Qt results 7.1 million US users up 34%, revenue US$261.8 million, annualized US$1.05 billion( A$1.3 billion) vs Afterpay full year A$822 million – Afterpay US revenue A$435 million (US$325 million)

- Capital One – the US Card monoliner says it will test BNPL as part of its card offer – interesting given  9 month ago Cap One stopped BNPL payments linked to credit cards.

 - Fintechs Revolut, Monzo and Curve announce plans to launch BNPL - a pure interchange play by these prepaid issuing neo banks - yet another reason to increases losses

- Affirm to follow Peteton to Australian market  – has applied for ASIC registrations.

- Goldman Sacs buys POS lender GreenSky which offers loans for services.

- JP Morgan hints at BNPL offers. Head of Consumer hinted that JP Morgan would offer its own BNPL products being developed.

- Mastercard announces a global push in 2022 starting in USA, UK and Australia has partnered with major processes like FIS, Synchrony, Marqeta, Huntingtons, Barclays and Fifth Third Bank.

A theme developing across ASX BNPL public companies - slowing sales, increased losses, bad credit and increasing costs, a direct result of competition and the rushed offshore expansion push.

Mastercard to launch new BNPL service

PAYMENTS DIVE Lynne Marek Senior Editor Sept. 28, 2021

• Credit card giant Mastercard announced in a Tuesday press release it's launching a new buy now-pay later service that will let consumers pay for goods online and in stores in four installments, without any interest rate fees. A company spokeswoman said the new payment option would be rolled out next year.
• Mastercard is locking arms with some of the biggest names in payments to offer the new service, including payments processor FIS, card issuer Synchrony, banking behemoth Barclays and modern card company Marqeta, it said in the release.
• The new Mastercard way to pay will start in the U.S., Australia and the United Kingdom in the first quarter of next year, and later will be spread during the year to millions of additional merchants who accept the company's cards worldwide.

While some legacy companies have said in the past that they didn't need to jump on the BNPL bandwagon, clearly Mastercard's announcement shows the worldwide trend is now taking on board even major legacy companies.

Purchase, New York-based Mastercard said today that adding this new service, called Mastercard Installments, for card and real-time payments will give merchants and consumers more options for check-out at a time when they are demanding it.

The trend that started in Australia spread quickly to Europe and has been growing in recent years into a global craze as merchants acknowledged that the sometimes higher fees they pay for the credit service also results in bigger purchases and more return business.

A Juniper Research study published this year estimated the new payment method could account for $995 billion in sales by 2026.

“Mastercard Installments has been built on our guiding principles to protect consumers and enable choice without sacrificing trust and security," Mastercard Chief Product Officer Craig Vosburg said. "It's a digital-focused way to pay today and tomorrow, delivered through consumer’s most trusted relationships with their banks and other lenders, at merchants of their choice.”

The company said the new BNPL installment choice will have to be pre-approved beforehand, with value stored in a digital wallet, prior to it being used online or in-store wherever Mastercard's cards are accepted.

"Instant approvals during checkout will be available through Click-to-Pay shortly after launch," Mastercard said in the release. "Consumers will have full transparency on lender practices up-front during the approval process, and unlike most current BNPL offerings, consumers will continue to benefit from zero liability fraud protection, the ability to challenge unrecognized charges, and the peace of mind that comes with Mastercard’s acceptance footprint."

Mastercard said it will make the new service available "without onerous integration into the merchant infrastructure, allowing them to quickly offer secure and competitive BNPL experiences at scale."

Banks will be able to offer the installment option to merchants with "minimal, simple integration," the release said. In addition to Barclays, Fifth Third will also participate in the new Mastercard program.

Software developers and other companies creating BNPL options can join in as well. "Digital wallets and BNPL players can easily integrate Mastercard Installments’ APIs and deploy the solution to consumers and already integrated merchants," the release said.

Payments giant Mastercard chases Afterpay success with global BNPL products

 SYDNEY MORNING HERALD  By Clancy Yeates September 28, 2021

 Payments giant Mastercard will launch new technology allowing banks around the world to offer buy now, pay later (BNPL) products, in a sign the instalment payments pioneered by Afterpay have well and truly entered the financial mainstream.

The global card business on Tuesday night said strong demand for BNPL services had prompted it to develop infrastructure that will allow banks, fintechs and other lenders to deploy instalment loans across its vast network.

It said growth in BNPL products continued to accelerate globally as digital commerce boomed, and banks and merchants wanted to offer shoppers new ways to pay.

BNPL products are short-term, interest-free instalment loans that have surged in popularity, and are competing with Mastercard’s traditional business in credit cards.

Mastercard is launching the program in Australia next year, and two of its first local partners will be Qantas and consumer lender Latitude Financial.

It comes after giants including Commonwealth Bank, Citi and PayPal have this year joined the stampede into BNPL, a trend that is tipped to squeeze profit margins of specialists such as Afterpay and Zip.

 Mastercard is already involved in the fast-growing BNPL sector - its existing credit infrastructure is being used in Commonwealth Bank’s BNPL offer - but the new program has been specifically designed for BNPL products.

Division president for Australasia, Richard Wormald, said the infrastructure would allow banks, fintechs and other lenders to build their own BNPL products without the need for extensive customisation. The technology could support the type of model used by Afterpay whereby customers pay back their loan over four fortnightly payments, or other variations such as loans paid back over a year.

“We will expect to see, and frankly have already seen, interest from banks of all sizes, lenders, merchants looking for alternatives and new ways to offer lending products to consumers,” Mr Wormald said.

Mr Wormald played down the competitive threat to traditional credit cards from BNPL services, predicting there would always be a place for the credit card.

“I don’t actually see them as a threat at all. I see buy now, pay later as just an evolution of a lending offering - the model’s actually been around for many years,” he said.

Latitude Financial chief executive Ahmed Fahour said: “Through our long-standing partnership, Latitude is looking forward to working with Mastercard to bring new BNPL payment solutions to life in Australia, benefiting merchants and providing customers with a superior shopping experience.”

One concern for investors in BNPL businesses has been the risk of tougher regulation, including over the relatively high fees paid by merchants. BNPL firms such as Afterpay prevent retailers from adding a surcharge onto the purchase price, and the Reserve Bank has been considering banning these “no surcharge” rules.

Mr Wormald said Mastercard would allow retailers to add a surcharge, and it had informed the RBA of its plan. “We’re allowing the flexibility but we actually don’t anticipate that large numbers of retailers will apply surcharges,” he said.

Details of Mastercard’s fees for the service will be published closer to the launch next year. Individual lenders will determine the designs of the products including late fees, but Mr Wormald said they would be required to follow the principles of responsible lending.