Mastercard Inc (NYSE: MA) has joined its bandwagon of rivals as it has announced its new installment loan program called ‘buy now, pay later. The group announced that the new initiative would be launched in the U.S., U.K., and Australian markets. The industry will be implemented in 1Q 2022.
Mastercard Inc acts as the middleman in credit and debit card payments
Mastercard Inc does not lend to customers, institutions, or organizations directly. Instead, the group acts as a middleman in the process of payment for debit or credit cards. The same clarifies that Mastercard Inc will make way for the banks and fintech to double up as a plug-in for the Mastercard program and offer loans. It has come to light that Barclays U.S. consumer bank, SoFi, Synchrony, and Marqeta are a few who have displayed interest in taking advantage of Mastercard for rolling out installment loans.
Chief Product Officer at Mastercard Inc Craig Vosburg comments on the development
In a telephonic interview with a media organization, the Chief Product Officer at Mastercard Inc, Craig Vosburg, stated that customers are already displaying great interest in the buy now pay later initiative. According to the group, BNPL loans, on average spiked sales by 45%, and cart abandonment slumped by 35%. From the point of view of the customer, the initiative is more than just productive. Such loans successfully woo the customer as they are a cost-effective alternative, and they are a better option than the traditional revolving credit. The same is one of the reasons why many groups in the fintech sector are attracted to an initiative like this.
The lender can decide on the rate among other terms and conditions
Despite many could start with interest-free payments, plans differ in terms of interest payments. However, Mastercard Inc shared that the onus of fixing an interest rate and deciding if a credit card can be used to pay for the loan installment is up to the lender. A section of people has cautioned about the occurrence of additional credit. Another set of people is worried if borrowers will depend on traditional recognition methods to pay the loan installment. Moreover, it has come to light that not all pay-later dealings are brought to the notice of credit bureaus. Thus, companies offering such loans claim that they have the upper hand as they are in a position to ascertain how credit-worthy an individual is.
