BNPL has been getting a lot of traction lately. In the U.S., 75% of buy now pay later users belong to this age demographic. Also, half of BNPL consumers have stopped using their credit cards altogether in Australia, opting instead for interest-free instalments.
BNPL growth has caught the attention of some top players in the payment space, as Mastercard and Visa are looking to throw their hats into the ring. According to reports, Visa and Mastercard are exploring ways to launch their respective BNPL platforms in India by the end of the fiscal year 2022.
According to people familiar with the matter, Visa and Mastercard are said to be looking for partners to establish platforms that would enable retail brands and online merchants to directly tie-up with lenders and provide their customers with various payment options.
The move by Visa and MasterCard to venture into this space is not surprising. If you are familiar with the economic principle that people respond to incentives, you will understand Visa and Mastercard's decision.
What is this incentive?
A perfect explanation is the adoption rate of BNPL and its future projections. By 2025, BNPL is expected to hit $680 billion. With these figures and India's population, it is understandable why both firms are channelling their resources into this space.
Coupled with this fact, Mastercard believes that BNPL could lead to a 45 per cent jump in average sales from existing relationships and a 35 per cent cut in cart abandonment.
Both payment companies have talked with major card-issuing local banks on their own networks with product propositions. Visa is also believed to be in discussion with one or more payment gateways for a strategic alliance.
India in focus
GDP: $2.623 trillion in 2020 compared to $2.871 trillion in 2019
Population: 1.38 billion in 2020 compared to 1.366 billion in 2019
GDP per capita: $1,900 in 2020 compared to $2,100 in 2019