BNPL is a credit option that gives customers the option of deferring payments at storefront and ecommerce pages for free or converting the transaction value into Equated Monthly Installments (EMIs). This facility is also provided by the financiers to those who do not have credit cards.
Visa and Mastercard are reportedly looking for partners to set up platforms that will facilitate retail brands and online merchants to tie up with them directly. banks and offer various payment options to their customers, as said by the sources cited above.
The CEO of a large private bank said, “Visa and Mastercard both have the BNPL platform in the works, and it is completely understandable as they have a platform to build a platform for banks entering this space. There is a goldmine of customer data.” The executive did not want to be named.
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Both Visa and MasterCard have approached major card issuing local banks on their respective networks with product offers. Sources said Visa is in talks with one or more payment gateways for a strategic tie-up.
Visa and Mastercard did not respond to ET’s queries on the subject.
Currently, the service is offered by startups like ZestMoney, Capital Float, PayU’s Lazypay as well as Pine Labs and Paytm. The market has seen significant traction in the last two years with millions of Indians shopping online through the pandemic.
The move is in line with BNPL’s efforts of Visa and Mastercard in various international markets. Last month, Mastercard announced the launch of a new BNPL platform across its acceptance network in the US, UK and Australia. This comes at a time when global fintech companies, such as Square, PayPal and Klarna, are betting aggressively on this segment.
Mastercard believes that BNPL can drive a 45% increase in average sales and 35% reduction in vehicle abandonment from existing relationships, a source privy to the matter told ET.
Visa has also launched BNPL initiatives in markets such as Canada and Malaysia and is reportedly setting up a global BNPL vertical to oversee growth. According to a source, a top executive in Visa’s South Asia team could head the vertical, though ET could not independently confirm the proposed appointment.
According to industry insiders, the typical model would include a financier with a merchant and a platform for a fixed transaction fee. Since there is no interest rate, this facility is offered to customers with a merchant discount rate – or transaction service rate – of around 1.5%.
The move is seen by industry insiders as an attempt by US card companies to gain first mover advantage in India’s nascent online installment payments market.
Another source close to the conversation said the plans were finalized after the Reserve Bank of India (RBI) announced stringent card data storage norms.