Mastercard Inc. MA has expanded its partnership with fintech company Jifiti to continue providing point of sale (POS) financing. The agreement allows both merchants and issuers to offer credit and consumer financing to Mastercard holders.
POS financing is a kind of buy-now-pay-later (BNPL) facility. BNPL space as a huge market opportunity and is likely grow further. Per the company’s research, nearly three-fourth consumers interested in installments prefer the feature to be added to their existing card. Also, three of four Americans who tried the installment plans for the first time during the pandemic intend to continue doing so after the coronavirus dies down. This reflects customers’ growing desire for such solutions.
Given that e-commerce gathered much steam after the COVID-19 outbreak, buyers resorted to online buying. They are also demanding financing support as most of them are facing financial constraints from job losses, low earning from business, etc. This staggered payment functionality allows customers to make purchases, which would otherwise be layaway targets or beyond their budget.
POS financing is a win-win deal for all participants involved in a transaction – retailers, lenders and customers. Retailers benefit from higher purchase completion and reduced shopping cart abandonment while customers can make large value purchases with ease and lenders can increase their loan offerings too.
Mastercard thus perceives this kind of service to gain ground among customers and has been actively forging deals to that end. Notably, this month, the company partnered with Global Payments Inc. (GPN) subsidiary Total System Services to provide issuers and merchants in North America, BNPL services to Mastercard card holders. It also signed a pact with QuadPay to provide its cardholders with a financing plan and help them pay back in installments instead of clearing the entire cost upfront for their purchases.
Also last year, Mastercard acquired Vyze, a digital commerce and payments matchmaker that collaborates with lenders and merchants, enabling them to offer installment loans to consumers who are buying their products.
Mastercard provides a comprehensive suite of BNPL offerings, which includes Pre-sale, Point of Sale and Post-Sale. Customers can access these varied options to decide how they can manage their finances and expenses. The company forged alliances with Fly Now Pay Later, Splitit, Divido and Pine Labs to provide BNPL services worldwide. Per an Accenture figure cited by Mastercard, the BNPL industry boasts an astronomical market value of $1.8-trillion. Thus, this space remains largely untapped.
The world of POS financing is expanding. Per Mastercard, the market is growing at an annual 20% rate in the United States with similar growth rates found in Europe, Asia and Australia. Therefore, this space is attracting players in hordes. Globally, it is predicted to reach worth $2.52 trillion in 2022.
Last year, Visa Inc. V, a major players in the payments industry, announced that it will tie up with banks and merchant clients to pilot an installment payment solution starting January 2022.
Another peer PayPal Holdings, Inc. PYPL recently announced its foray in the BNPL space by offering a payment product named Pay in 4, which will let customers pay for any item between $30 and $600 in four installments within six weeks.
Square Inc. SQ also offers Square Installments that allow small business clients like hairdressers, car parts sellers, et al to offer payment flexibility in installments to their customers.
Year to date, the stock has rallied 13.6% compared with its industry’s growth of 2.2%.
Mastercard currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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