(Bloomberg) — Mastercard Inc. will make it easier for banks to offer installment plans as consumers flock to options for paying off purchases over time.
Such buy-now, pay-later options have swelled in popularity in recent years, especially among younger consumers. With Mastercard’s new push, lenders will be able to approve consumers for an installment loan before a purchase or offer the option during checkout, the company said in a statement Tuesday.
As part of the new program, Mastercard will allow lenders to use consumers’ banking data — information it has access to after purchasing the data aggregation company Finicity last year — in their underwriting decisions, Linda Kirkpatrick, Mastercard’s president of North America, said in an interview.
Financial-technology companies focused on the buy-now, pay-later space have already diverted as much as $10 billion in annual revenue away from banks, according to McKinsey & Co. For merchants, buy-now, pay-later services increase average sales by 45% and reduce the risk that consumers will abandon their shopping carts before they finish checking out online, Mastercard said.
“The lenders then look at that and say, ‘Certainly we want to be able to play in that space,’” Kirkpatrick said. “The reality is this program is complementary to the work that banks are already doing today because it captures consumers at different moments — it captures them before the purchase, and during the purchase.”
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