It’s no surprise that new ways to spend now and pay later continue to be popular. What’s interesting to note are the two different approaches taken by Visa and Mastercard. This article in Yahoo Finance indicates Visa announced a new installment loan function:
“With Visa’s installment solutions, Visa cardholders will have the option to divide their total purchase amount into smaller, equal payments over a defined time period on qualifying purchases, at the store and online or while traveling abroad.
“Visa’s installment capabilities are changing the game by allowing issuers to leverage an existing payment account consumers already have and are familiar with, instead of asking them to submit to a credit check, download an app or open another line of credit,” said Sam Shrauger, senior vice president, global head of issuer and consumer solutions, Visa. “We expect installments to become a foundational method of payment at checkout for both domestic and cross-border commerce payment transactions.”
Visa is partnering with clients around the world to pilot a variety of installment use cases. CyberSource will be a leading payment management platform to support Visa’s installments capabilities for its participating merchant clients and acquirer partners that utilize CyberSource for global payments enablement. In addition, MakeMyTrip integrated with Simpl platform and Kotak Mahindra Bank in India, Alpha Bank, eMAG, ING Bank Romania and PayU in Romania, Russian Standard Bank in Russia and Abu Dhabi Commercial Bank and Mashreq bank in United Arab Emirates are all piloting Visa’s installments capabilities.
Visa’s installment solutions aim to simplify today’s friction-filled and time-consuming installment process at checkout for buyers and sellers. Online shoppers today are typically presented with an installment offer at the final checkout screen. Consumers are then required to sign up with a designated provider, apply for a line of credit and – if approved –use their funds toward a given purchase. Each time a consumer shops with a different merchant who offers a different installment capability, they need to complete the same process again to obtain a new line of credit.
Now, merchants can leverage cardholders’ existing relationships with financial institutions to provide Visa’s installment solutions at the point of sale – online or in store – through a single API-based integration. This will ultimately help merchants enhance sales, improve customer loyalty and overall cash flow, while offering their shoppers a friction-free payment experience at checkout.”
Nothing is said about how rates will be determined or terms and conditions communicated, but this will certainly be a more convenient option for many.
In April, Mastercard announced the acquisition of Vyze in an effort to establish a financing marketplace. Finance companies create loan structures (90 days without payment, monthly billing, Etc.) they expect will appeal to merchants and consumers. The merchant selects the offers that align with their specific situation and need and makes those offers available to their shoppers through the Vyze Financing Center.
It will be interesting to watch the reaction and adoption by FIs, merchants and consumers.
Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group
