Mastercard builds out consumer-centric buy now, pay later solutions

  • Mastercard partnered with payment processor TSYS to offer issuer-based installment options to cardholders. 
  • With this move, Mastercard joins rival PayPal in attempting to use their established payments businesses to find success in the space.

The card network has partnered with payment processor TSYS to offer issuer-based installment options to cardholders. These offerings include letting consumers decide to spread payments out before they make them, to receive notifications about installment options for their card while they shop, and to turn purchases into installment payments after a purchase was already made.

Mastercard Switched Transactions Annual Growth

Mastercard teams up with TSYS on installment options.

Business Insider Intelligence

Mastercard’s features differ from merchant-focused offerings from buy now, pay later (BNPL) leaders like Afterpay and Klarna, and could be appealing since they enable consumers to access installments via their Mastercard and issuing bank, rather than a new service.

The card network adds these consumer-focused installment solutions to its growing merchant-based BNPL efforts, strengthening its position in the space. Mastercard has partnered with Splitit to enable more merchants to offer its BNPL solutions and recently teamed up with QuadPay to add the BNPL provider to its Vyze platform, which Mastercard acquired in 2019 and connects merchants with lenders.

These moves could allow Mastercard to provide its millions of merchants with a variety of BNPL solutions they can offer to consumers when they shop online or in-store, so it can be a major facilitator of BNPL solutions. And by combining these merchant-based BNPL solution efforts with its new consumer-centric ones, Mastercard can provide BNPL options to consumers through a variety of convenient channels that other providers may struggle to match.

Mastercard joins PayPal in trying to leverage its established payments business to take on digital upstarts and lead the burgeoning BNPL industry.

  • Mastercard and PayPal have added new installment solutions to take advantage of their existing user bases and merchant networks. PayPal recently unveiled an installment payment offering that’s included in existing PayPal pricing for merchants so they can offer it at no additional cost. This could mean that PayPal’s over 26 million global merchant accounts will eventually be able to offer its solution to its over 300 million other accounts, just like Mastercard can potentially push its BNPL solutions to many of its cardholders, issuing banks, and merchants. These advantages should help Mastercard’s and PayPal’s BNPL solutions quickly gain adoption because they’ll be widely accessible to consumers and merchants that already have a relationship with them.
  • This poses a serious risk to BNPL-focused firms, which have been enjoying rising interest in the industry during the pandemic. BNPL providers like Afterpay and Klarna have seen their sales pick up because the pandemic has popularized ecommerce and created financial uncertainty for many consumers. But these firms can’t compete with the established network sizes of Mastercard and PayPal—Klarna’s network of over 200,000 retail partners is dwarfed by PayPal’s merchant base—potentially limiting their success going forward. These firms will need to convince merchants and consumers to choose their offerings over those from payments giants in the future, which they can do by offering loyalty programs and adding more value by expanding their role in product discovery.

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