‘Buy now, pay later’ is here already

February 23, 2021 | By Zahir Khoja

Over the last year, we’ve heard a lot about our “new normal.” But that’s a deceptive term. There’s nothing new about our wants and needs — to connect, to easily and seamlessly navigate the world (even if it’s largely a virtual one), and to exert control over our own lives. What’s new is that the technology is now there to meet the moment and create fresh ways of moving forward.

The pandemic has, if anything, underscored our desire for choice, control and simplicity in managing our money, and that’s what continues to drive our commitment to a fast-growing checkout option — often referred to as installment loans or “buy now, pay later” options. As we have done for decades in connecting banks, businesses and people to simple, safe payments, we help make these transactions work, using our technology and forging partnerships to bring these choices to shoppers at checkout in ways that make the most sense for everyone.

The ability to choose how you want to pay means shoppers can spread the cost of a specific big-ticket item (or even a smaller splurge) over a set period of time. It’s not new — remember layaway? — but the way it can be delivered is. Taking installments plans from a cumbersome, paper-heavy process to an entirely digital and near-real-time experience, we’re helping merchants customize where, when and how their customers pay, at any stage of a shopping journey, online or in store. And for consumers, it means you walk out of the store today with exactly what you need.

Pre-pandemic, this sector was already primed for growth, and the spike in online commerce over the last year is reshaping and often solidifying new behaviors among all age groups. Consumer surveys and sales data confirm that buy now, pay later is on the rise, and interestingly, it’s not just younger and more budget-conscious consumers propelling the growth. A post-Black Friday report from PYMNTS showed that young adult to middle-aged shoppers were most likely to make installment purchases, with the youngest and oldest shoppers least likely. Shoppers with incomes in excess of $100,000 were twice as likely to use buy now, pay later than those below.

Global consumer sentiment surveys conducted by Mastercard every two weeks during the pandemic also show interest in payment plans increasing, and one of the top reasons is that they’re easy to manage online.

By working with banks, fintechs and other players, we help merchants to deliver these installment options safely and securely to people the moment they are seeking them, improving satisfaction and brand loyalty while increasing sales for merchants by more effectively turning browsers into buyers.

The models we have embraced ensure shoppers have that choice at checkout, including continuing to work directly with our traditional issuing partners to split transactions into installments on their cards. We are also collaborating with alternative lenders around the world to enable merchants to offer installments at checkout with simple, easy-to-navigate terms that harness the safety, security and convenience of our network.

Nearly a year ago, our world did get smaller, but the power of our technology and the strength of our partnerships is opening up a new world of payment options — on any channel, anytime, anywhere. 

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Zahir Khoja, Executive Vice President, Merchant Solutions and Partnerships, Mastercard