Mastercard swoops in on share of buy now, pay later market with Installments

Mastercard Installments will be launched next year in Australia, the US, and the UK.

Mastercard has announced it will be launching Mastercard Installments, a buy now, pay later (BNPL) program designed to give banks and fintechs the chance to offer their own BNPL product.

According to the payment giant, it will allow banks and fintechs to offer a variety of installment options to consumers, without "onerous" integration into a merchant's infrastructure.

BNPL allows individuals to purchase goods without immediate payment. Instead, users can pay for the purchase of a good later or in instalments. In the case of Mastercard Installments, those installments plan would include a 0% interest and pay-in-four model.

Mastercard is launching the program next year in Australia, the US, and the UK. Qantas Loyalty and Latitude in Australia, and Barclays US, Fifth Third, FIS, Galileo, Huntington, Marqeta, SoFi, and Synchrony in the US have been named as initial launch partners.

Mastercard chief product officer Craig Vosburg assured Mastercard Installments has been built to "protect consumers and enable choice without sacrificing trust and security".

"It is 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," he said.

The move by Mastercard follows in the footsteps of others such as Commonwealth Bank of Australia (CBA), which recently released StepPay, a BNPL offering that links to its customers' bank account, can be used anywhere debit and credit payments are accepted for transactions, and there are no ongoing fees. There are also no additional costs to businesses, other than standard merchant fees. 

Last week, CBA claimed it entered the BNPL market because it thinks it would motivate policy makers to step up the way the emerging sector is currently regulated.

"One of the reasons why we entered the space as we actually thought that perhaps the most expedient way for regulation to be introduced in that sector would be for us to offer it. That hasn't today been forthcoming," CBA chief executive Matt Comyn told the Standing Committee on Economics on Thursday.

When signing up for BNPL services, customers are not required to undergo credit checks -- they can just sign up and spend. 

ANZ boss Shayne Elliot described the ease of accessing BNPL services as ironic. 

"Afterpay, which is now owned by Square, has launched what they call retro buy now, pay later. So, something you've already bought, you've already paid for, you can change your mind, and they'll give you credit against it," he said.

"But apparently, according to our regulatory framework, that's not credit, and therefore, they're not subject to the same rules as everybody else about responsible lending.

"If I gave you an AU$200 overdraft without doing a full credit check … I'd have a breach report with ASIC. I find that's exactly the sort of regulatory arbitrage I don't think is helpful in the marketplace."

In March, a new BNPL code of practice came into effect.

Developed by the Australian Finance Industry Association (AFIA), the code [PDF] is touted as being a "proactive approach to increasing consumer protections" that goes "beyond current regulatory obligations for BNPL products or services".

Shadow Assistant Treasurer Stephen Jones said the code was the first step towards an appropriate regulatory regime for the emerging sector.    

"This is a genuine attempt by the industry to set sensible and fair rules around conduct in an emerging sector of the financial services sector," he said. "The financial services industry needs to show it has learned the lessons of the Banking Royal Commission and ensure that these code provisions are rigorously enforced." 

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