MasterCard has partnered with Verifone Systems to introduce a new application, Mastercard Installments, that allows shoppers to decide instantly at the point of sale if they want to pay for a purchase on monthly installments.
The Mastercard Installments application is built on the open, cloud-based Verifone Commerce Platform. When paying at checkout, eligible shoppers will be offered the opportunity to pay on installment and provided with interest rate information. They can immediately accept the terms of the plan without submitting to a more formal credit check.
The option, which will be offered at checkout to cardholders previously deemed eligible for the financing, already has launched on Verifone payment systems in Romania, and will be rolled out on Verifone machines in the U.K. starting in January.
This looks like a bold move by one of the incumbent giants of the payments sector to make a direct appeal to millennials and other consumers that don’t often use credit cards, or have sworn off traditional credit card practices and the ease with which they allow consumers to pile up and carry forward crippling amounts of debt.
Research has suggested that as a demographic, millennials have been shunning credit cards, although in truth they may just be harder to reach with tried-and-true card promotions. For the most part, the major credit card companies have yet to figure out how to address reality, which has left room for a startup like Affirm, which allows consumers to split payments for purchases ranging from $50 to a few thousand dollars (somewhat similar to PayPal’s Bill Me Later option, and surprise — Affirm was founded by PayPal co-founder Max Levchin.)
MasterCard may be on to something as it rolls out a point-of-sale capability that allow it to quickly set up consumers on interest-charging payment plans, rather than trying to recruit them through traditional promotions that are essentially an invitation to submit to the cumbersome and time-consuming formalities of getting approved for a credit card.
If it works, it could threaten the model put forward by Affirm, and help an old company get into a segment of financing that appeals to new and young credit users, potentially broadening its market base. If it doesn’t work — if MasterCard ends up extending credit to too many of the wrong people, for example, or young consumers feel they are being played — it could prove to be an expensive mistake.
The payments sector right now looks like many industries in which incumbents with longstanding practices are being challenged by newer market entrants using technology to exploit overlooked opportunities, showing the incumbents how their sector is moving quickly right under their feet to different ways of doing business. In payments, the new is represented by companies like PayPal (which isn't all that new anymore), Affirm, Apple and Google, just to name a few. We know who the incumbents are, and they have size, established customer bases, reputation and experience on their side. But if they don’t think creatively, they could miss out on whatever's next in payments.