Pay later, not never – Exclusive interview with Mastercard

Wednesday 20 January 2021 10:04 CET | Editor: Oana Ifrim | Interview

Sandeep Malhotra, Executive VP, Products and Innovation, Asia Pacific, Mastercard: The tremendous growth of cashless commerce, including the instalments segment, presents huge opportunities for players in the payments ecosystem

The Buy Now Pay Later (BNPL) phenomenon was one of the most anticipated developments in ecommerce this year. What factors have led to the rapid ascent of Buy Now Pay Later globally in 2020? And in which verticals?

COVID-19 has accelerated the digital transformation in many different sectors, and ecommerce was no exception. We’re seeing a rapid and lasting shift to ecommerce and contactless payments, and there are huge opportunities for merchants and issuers that offer consumers the flexibility of paying later at checkout in stores and online.

Using instalments to make purchases today is becoming more popular for people all over the world who want a wider range of payment choices, the ability to better manage cash flow, and the convenience of using their own money to stagger payments on appliances, TV sets, and a variety of other bigger ticket items.

What we’re seeing with our Pay Later partnership with Pine Labs, an Asian merchant commerce platform, for instance, is that automobiles and durables like household appliances are major categories. In India, for example, purchases of durables using Pay Later were up 37% in October 2020 from pre-COVID levels and automobiles were up 980%.

Mastercard data shows that if Asia’s Pay Later providers were combined into one, they would be a top-five merchant for issued consumer cards over the last 18 months. The scale will only grow as Mastercard and Pine Labs expand our existing Pay Later solution in India and Malaysia into five Southeast markets in early 2021 – starting with Thailand and the Philippines in February and then Vietnam, Singapore, and Indonesia.

In terms of overall purchasing trends, the latest Mastercard SpendingPulse data shows sales in the US of furniture and furnishings were up 20.1% in October 2020, with hardware up 11.5% and groceries up 7.1%.

The survey also forecasts that US ecommerce sales will rise by 34.6% during the holiday season, 55% of people plan to do the majority of their shopping online, and 66% plan to shop in stores with contactless payment options.

What are the key benefits of BNPL for ecommerce? What has been the impact of COVID-19 on Buy Now Pay Later solutions and ecommerce as a whole? 

Any business will benefit from offering Pay Later, which directly influences buying behaviour. However, it’s an especially attractive proposition for SMEs that have taken a hit during the pandemic by being able to offer instalment options right at checkout in stores and online.

For merchants, Pay Later leads to bigger average ticket sizes, reduces cart abandonment and results in higher sales. Mastercard research shows that 43% of consumers in Asia would be willing to spend at least 15% more if they were able to pay in instalments. This could definitely benefit merchants.

The power of Pay Later was also shown in a study by BigCommerce, with 36% of people saying instalment financing enabled them to buy a more expensive item and 31% saying they would not have completed the transaction at all without instalments.

What we’ve seen so far in our partnership with Pine Labs is gross transaction volumes of Pay Later purchases are 15% higher than pre-COVID levels and instalment purchases were up 30% year-on-year in October 2020. Our solution is also broadening the benefits to more merchants and consumers, with Tier 2 and smaller cities contributing 54% of the overall transaction value of Pay Later products.

How has COVID-19 reshaped the payments industry in APAC? Are new payment trends on the rise during the pandemic? What is Asia Pacific’s approach to BNPL?

The shift to digital payments was already happening before COVID-19 but the pandemic drove it forward quickly and irreversibly. Consumers and businesses in Asia have been navigating the economic implications of the pandemic longer than other places and they have moved decisively to ecommerce and touch-free payments as part of an experience that is safe, secure and seamless.

One example of this digital-first mindset is the rise in Mastercard’s volume of contactless payments. In the third quarter of 2020, 41% of in-person transactions were contactless – up from 37% in the second quarter and up from 30% during the same period of 2019. Our research shows that this trend will only grow.

With its fast-rising and digital middle class – plus more than half of the world’s consumer borrowing – the Asia Pacific region presents major opportunities for merchants, fintechs, and lenders that offer shoppers the flexibility and convenience of instalment options.

Mastercard’s Pay Later solution via credit cards, debit cards, and bank accounts is totally in line with our strategy to deliver a global multi-rail network for all aspects of digital commerce – from person-to-person payments to account-to-account payments to real-time payments.

Mastercard recently announced partnerships with Spotii and TSYS. What is the significance of these agreements and could you please elaborate on what would this mean on a global perspective?

Spotii and TSYS are different players in the payments ecosystem. Spotii is purely a BNPL platform, while TSYS is a payments processor.

Our partnership with Spotii is merchant-focused and will help expand its network to Mastercard’s extensive merchant footprint and offer consumers an intuitive, convenient budgeting tool. With TSYS, we’re giving consumers in the United States the option to use their Mastercard card to split transactions into instalments before, during or after checkout.

The expansion of Mastercard’s Pay Later partnership with Pine Labs into Thailand, the Philippines, Vietnam, Singapore, and Indonesia is also part of our global goal to offer more consumers and merchants a broader range of payment options with a variety of convenient channels.

Do you think COVID-19 will change shopping behaviour in the long term in Asia Pacific, as consumers want multiple payments options?

The future of money is digital and ATM withdrawals are at an all-time low. Mastercard research shows

that more than 70% of consumers globally will continue or increase online purchases. In Asia, 46% of people plan to use less cash and large majorities say contactless payments are here to stay – including 71% in Australia, 77% in India, 73% in China, and 62% in Japan.

ASEAN is the fourth largest ecommerce market globally and that’s likely to stay strong.

Consumers everywhere are also embracing the convenience of on-demand products and services – whether it’s food delivery, fitness courses, telemedicine, or entertainment – and they expect maximum choice and flexibility in how and when they pay.

That underscores the need for all businesses – and especially SMEs – to maximise choice and convenience for consumers and embrace the shift to digital and contactless commerce. We’re helping businesses big and small to do just that.

The implications are immense. A recent study for Cisco by International Data Corporation showed that digitalisation of SMEs could add USD 2.6 trillion to USD 3.1 trillion to Asia Pacific’s GDP by 2024 and that nearly 70% of SMEs in the region are accelerating digitisation due to COVID-19. That’s good news for everyone.

What is the roadmap for ecommerce transactions using BNPL in the next two years? How will Mastercard help forge the future of BNPL?

Deutsche Bank expects instalments to grow to USD 800 billion by 2023. That will be equal to 13% of ecommerce – a big rise from 3% today – so that just shows the growth potential for merchants and issuers who make the move to offering Pay Later options.

Most instalment solutions – whether by a bank or a fintech – require people to use a credit card or debit card. Ours is much broader in expanding choice by also enabling consumers to link their bank accounts directly.

It’s an omnichannel solution that is easy to integrate and enable by reducing the technical and operational heavy lifting. Merchants and issuers get a single access point into an instalments network that is quick to scale.

Our solution is agnostic to the card network and payment account is API-enabled and does not require any changes to authorisation, clearing, or settlement. By leveraging Mastercard’s “Pay by Account” functionality, merchants, and issuers can offer instalments online and offline via credit cards, debit cards, and bank accounts.

This offers consumers the flexibility to manage cash flow better, opens Pay Later to millions of people who do not have a credit card and empowers financial inclusion by increasing the reach of cashless transactions that are secure, simple, and smart.

What the market is missing, which Mastercard also delivers, is the ability to offer instalment options at the point of interaction. This alters consumer behaviour, influencing people to “add to cart” or boost their spending. Our goal is to provide merchants and issuers with the ability to offer point of interaction instalments for “off-us”, cross-border and everywhere Mastercard is accepted.

Our solution also connects banks, fintechs, payment gateways, and device makers to a rapidly growing Pay Later market and offers major potential for merchants, brand owners, and financial institutions to drive payment innovations for consumers.

Through partnerships with Pine Labs, Spotii, TSYS, and others, we aim to provide millions of merchants with a variety of Pay Later solutions they can offer to consumers online and in stores.

What innovations have yet to be brought to the BNPL space that we might see in the next five years?

Overall, Pay Later is gaining momentum from the lasting rise in online spending, the preference towards debit over credit, and the budget consciousness of consumers in these economic times. The tremendous growth of cashless commerce, including the instalments segment, presents a huge opportunity for players in the payments ecosystem.

With technology and the entire ecosystem shifting so rapidly, it’s essential to have successful partnerships to co-create and innovate. Being a true partner to everyone is crucial for Mastercard to accelerate innovative payment solutions, including Pay Later options.

The developments we’re seeing in areas like Open Banking, real-time payments, digital currencies, blockchain, and artificial intelligence will continue to evolve and expand the ecosystem. Also, the Internet of Things and the deployment of new infrastructure such as 5G will rapidly accelerate the availability of even more convenient payment applications.

All these advances will flow into the Pay Later space and allow merchants, issuers, fintechs, and everyone else in the payments ecosystem to develop and offer even more innovative solutions for consumers that will take convenience, security, and the shopping experience to an entirely new level.

As a global technology company, Mastercard is playing a major role in this exciting future as a digital transformation leader in the fintech space and is a very keen supporter of fintechs via incubators, investments, acquisitions, and partnerships.

We work closely with fintechs and other partners – including governments, financial institutions, and businesses – to drive solutions that maximise choice, bring people into the financial system, and power an inclusive, digital economy.

About Sandeep Malhotra 

In this role as Executive Vice President of Products & Innovation, Asia Pacific for Mastercard, Sandeep is responsible for product development and management, including the commercialisation of payment solutions that create a sustainable competitive advantage for Mastercard and its customers across Asia Pacific. This includes consumer and commercial products across Debit, Credit, Prepaid, Commercial, Payments Gateway, Processing, Acceptance, New Payment Flows and Digital Platforms & Labs. Prior to his current role, Sandeep was instrumental in defining and executing Mastercard’s real-time account-based payments strategy. Sandeep has been with Mastercard for the past 22 years.

About Mastercard 

Mastercard is a global technology company in the payments industry. Our mission is to connect and power an inclusive, digital economy that benefits everyone, everywhere by making transactions safe, simple, smart and accessible. Using secure data and networks, partnerships and passion, our innovations and solutions help individuals, financial institutions, governments, and businesses realise their greatest potential. Our decency quotient, or DQ, drives our culture and everything we do inside and outside of our company. With connections across more than 210 countries and territories, we are building a sustainable world that unlocks priceless possibilities for all. 


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Keywords: Sandeep Malhotra, MasterCard, cashless commerce, instalments, payments , buy now pay later, BNPL, e-commerce, fintech, banking, digitalisation, SMEs, merchants
Categories: Banking & Fintech
Countries: World
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