One of the highlights of our recent Buy Now Pay Later research report was that the market is in a state of flux. Yes, fintechs gained scale, but they are one-trick ponies and need to broaden their offering beyond the single $100 purchase. Yes, they do need to enhance their credit policies with more rigorous lifecycle offerings. And no, fintechs are not the sole participants in lending and will meet traditional players head-on.
Up on King Street, in Toronto’s financial district, where Visa’s Canada office is just about across the street from Scotiabank, comes an announcement of Visa Installments. Around the corner is the world headquarters for CIBC, another Canadian pillar bank. Both Scotiabank and CIBC now offer Visa Installments according to separate press releases.
Visa Installments is an elegant solution. It solves the weak lending model seen in BNPL fintechs by keeping the customer within an established credit line. As this official Visa video shows, when certain cardholders transact, they will be offered the opportunity to set their card payment on a specific installment lending schedule.
The transaction is subject to Visa security standards, which protect against fraud, and credit policy standards are within the issuing bank’s credit policies. The merchant may see fewer transactions, but what passes through the authorization system is clean, authentic, and irrefutable.
Mastercard has its version, and it is likely to expect similar options throughout the world. With Mastercard in the foreground, TSYS operates the infrastructure. Here is the product slick for Mastercard Ireland.
The next thing to watch is how fintechs will move. Lending competition is good and welcomed in most markets. The winning model will follow lifecycle lending. Don’t settle for financing one transaction; bring in the consumer and watch how they pay and transact. Then, think long-term with credit cards, personal loans, student loans, mortgages, and auto loans. As their life blossoms, be there with options for their family, partners, or anything in between. That’s the secret sauce for banks like JPMC.
Overview provided by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group
