Visa, Mastercard hop on for 'Buy Now Pay Later' ride, plan launch in India by end of FY22

Asia's Tech News Daily

visa, bnpl, mastercard, banking, banks, finance, card networks, india

Global card networks Visa and Mastercard plan to launch their respective Buy Now, Pay Later (BNPL) platforms in India by the end of FY22, three top industry executives aware of the developments told ET.

BNPL is a credit option that gives customers at storefronts and on ecommerce pages the option to defer payments free of cost or to convert the transaction value into equated monthly installments (EMI). The facility is provided by financiers even to those without credit cards.

Visa and Mastercard are reportedly scouting for partners to set up platforms that would facilitate retail brands and online merchants to directly tie up with banks and offer their customers various payment options, the sources cited above said.

“BNPL platforms by both Visa and Mastercard are in the works, and it makes complete sense as they have a goldmine of customer data to create platforms for banks looking to enter this space,” said the chief executive at a large private bank. The executive didn’t want to be named.

Global Templates

Both Visa and Mastercard have approached major card-issuing local banks on their respective networks with product propositions. Visa is also said to be in talks with one or more payment gateways for a strategic tieup, sources added.

Visa and Mastercard didn’t respond to ET’s queries on the subject.

At present, this service is offered by startups such as ZestMoney, Capital Float, PayU’s Lazypay as well as Pine Labs and Paytm. The market has seen significant traction over the last two years with millions of Indians taking to online shopping through the pandemic.

The move is in line with Visa and Mastercard’s BNPL forays in various international markets. Last month, Mastercard announced the launch of a new BNPL platform in the US, the UK, and Australia across its acceptance networks. 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 could lead to a 45% increase in average sales from existing relationships and a 35% reduction in cart abandonment, a source briefed on the matter told ET.

Visa, too, has launched BNPL initiatives in markets such as Canada and Malaysia and is reportedly setting up a global BNPL vertical to oversee the development. According to a source, a top executive in Visa’s South Asia team could head this vertical, although ET couldn’t independently verify the proposed appointment.

As per industry insiders, the typical model would involve a financier tying up with a merchant and a platform for a fixed transaction fee. As there is no interest rate, the facility is offered to customers with a Merchant Discount Rate – or a transaction service rate – of around 1.5%.

The moves are seen by industry insiders as an attempt by the US card companies to gain first-mover’s advantage in India’s nascent online instalment payments market.

Another source involved with the talks said that the plans were finalised after the Reserve Bank of India (RBI) announced stringent card data storage norms.

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