Adopting Mastercard Installments May Help You Boost Sales & Revenue
At this point, you’ve probably seen a “buy now, pay later” option presented to you at checkout a few times.
With the rise of third-party payment apps like Klarna, Afterpay, and Affirm, payment installment plans are a popular option. So much so the big card networks are paying attention.
Mastercard Installments aims to capitalize on the BNPL push. The program offers to make it easier for customers to purchase the items they want without high up-front costs. Merchants, in turn, can enjoy more sales and even protections against some existing eCommerce risks.
In this article, we’ll discuss the upcoming Mastercard Installments program: what it is, how it will work, and what potential benefits and drawbacks it presents.
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What is Mastercard Installments?
- Mastercard Installments
Mastercard Installments is a buy now, pay later option provided for the Mastercard payments network. The program offers consumers the option to pay for in-person purchases in monthly installments rather than in one lump sum.
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Mastercard Installments was initially introduced and piloted in 2016 (stylized as Mastercard Instalments). In this way, Mastercard anticipated consumer interest in BNPL (buy now pay later) options.
The platform allows consumers to split their purchases into manageable monthly payments. The service is integrated directly within the Mastercard network, which means it can be used wherever Mastercard is accepted, eliminating the need for third-party BNPL apps.
The estimated value of global BNPL transactions is expected to top 7.2 trillion dollars by 2025. According to Statista, around 70% of GenZers opt for BNPL at checkout more often than not.
At the point of sale, customers can opt to divide their total purchase cost over a defined period, easing the burden of large expenses. The program aims to make high-ticket items more accessible to a broader range of consumers by spreading the cost over time without incurring high interest rates or fees typically associated with credit card purchases.
Mastercard Installments are accepted across the Mastercard network. It can be instantly used online and in stores. And, it’s backed by the security and peace of mind that comes with Mastercard acceptance.
How Do Mastercard Installments Work?
The finer details of the Mastercard Installments platform are to be determined by participating banks. For instance, a bank may let buyers choose a payment plan at the moment of purchase, in-store or online. Or, they may allow buyers to store a pre-approved payment plan in a digital wallet, which they may use later.
The card issuer will set the overall credit limit, monthly installments, and interest rate. For example, a bank may offer to let the buyer pay in four interest-free installments.
When a customer decides to make a purchase using Mastercard Installments, the process begins at the point of sale. Upon selecting their items, the customer will be offered the option to divide their total purchase cost into manageable monthly installments. This can happen either in-store or online, depending on the merchant's setup.
Once the customer opts for the installment plan, the retailer will communicate with the card issuer to establish the terms, such as the number of payments and any applicable interest rates. The transaction is then completed, and the purchase amount is split into the agreed-upon number of installments. Payments are then scheduled and automatically deducted from the customer’s account each month until the balance is paid in full.
This differs from existing credit card programs. For instance, installment arrangements do have cumulative rollover balances; just the individual purchase and the limitations of the terms defined by the issuer.
Which Banks are Partnered With Mastercard Installments?
As outlined above, Mastercard does not issue credit to buyers through Mastercard Installments. Instead, they’ve partnered with a number of different banks to offer Mastercard Installments to bank customers.
As the company put it in a press release published in 2022, “Mastercard has welcomed a raft of new global partners to its innovative Mastercard Installments program and is expanding it further to support small businesses in the US.” They go on to state that these institutions’ willingness to participate illustrates “the demand for powerful buy now, pay later (BNPL) experiences from familiar and trusted brands.”
As of this writing, some of the institutions that have done this in different countries include:
| Country | Participating Banks |
| US | Barclays US, Fifth Third, FIS, Galileo, Huntington, Marqeta, SoFi, Synchrony, Cross River, Evolve Bank & Trust, Jifiti, Live Oak Bank, MOCA Financial, and WebBank |
| UK | HSBC, JP Morgan, and NatWest |
| Saudi Arabia | Saudi National Bank (SNB) |
| Australia | Qantas Loyalty and Latitude |
Benefits of Mastercard Installments
Everyone gets something different out of the Mastercard BNPL option. Consumers get increased payment confidence and selectivity without worrying over additional hits to their credit score. Lenders and merchants boosted profits and increased customer confidence in their products and services.
According to Mastercard, the benefits of Mastercard Installments as an option breaks down differently for each party involved:
Mastercard Installments for Consumers
Mastercard’s claim:
“A seamless experience offered through a choice of lenders where purchases can be made across the millions of merchants that accept Mastercard, backed by Zero Liability Protection. All without the need for a new debit or credit card. Mastercard Installments offers comprehensive consumer protections concerning responsible data use and fee transparency.”
What this means:
Customers stand to benefit most from Mastercard Installments. Although, that is not to say that consumer purchasing confidence is a small thing. Cardholder willingness to commit to larger purchases generally translates to higher profit margins for merchants and lenders. The beauty of BNPL options for cardholders is the ‘credit by extension’ logic, which helps many customers attain items they might otherwise find cost-prohibitive.
Mastercard Installments for Lenders
Mastercard’s claim:
“Mastercard Installments can help banks, lenders, fintech companies, BNPL players, and wallets see a faster path to market without the cost of building acceptance relationships merchant by merchant. Backed by the security and peace of mind that comes with Mastercard.”
What this means:
BNPL can help lenders better connect and engage with their clientele en masse. For many consumers, traditional lending isn’t an option. That can encourage many cardholders to ignore banking products altogether. Many previously untapped revenue streams are now open for exploration by offering payment installments.
Mastercard Installments for Merchants
Mastercard’s claim:
“Mastercard Installments helps merchants scale buy now, pay later offerings to their customers. The implementation is handled by Mastercard and the acquirer with no lift to the merchant to offer this new payment choice and no disruption to the existing customer experience. Mastercard Installments offers the same fraud solutions and consumer protections as other Mastercard transactions. Meanwhile, acquirers can also offer these installments capabilities to their entire merchant base with minimal, simple integration.”
What this means:
Merchants ought to be vested in providing as many payment options as feasibly possible to their customers, and for a good reason. Not every cardholder has the same credit score, immediate budget, or interest in applying for the in-store credit lines that might encourage sales. Mastercard Installments lets merchants reach this otherwise untappable market in a mutually beneficial way. BNPL options bridge the gap by allowing consumers to pay down the price of items they couldn't have afforded otherwise.
Mastercard Installments will move products, encourage customer loyalty, and build consumer confidence. In Mastercard’s words, “provide access to and support from a new suite of APIs at each step of the BNPL journey, from installment calculation to multiple repayment options.”
All of this sounds great. However, there are a few potential downsides to the platform. Mastercard encourages merchants and lenders to be aware of these factors and plan for them accordingly.
Risks Associated With Mastercard Installments
Most great ideas introduce an equivalent set of concerns. BNPL options, no matter how clever or well planned, are no exception to that rule.
Mastercard understands their market, and their name inspires trust in consumers and merchants alike. The company is also aware of the potential pitfalls of its push into BNPL. They want to make sure everyone involved understands and plans for the risks to protect themselves and all parties involved.
Some of the potential risks for merchants include:
Costly System Integration
This is no minor issue. Whenever you alter your payment portals, there is a decent expectation of increased cost, whether via staffing or OS or payment terminal alterations. There is still a bit of uncertainty about what the platform will cost to integrate. It’s a factor that many merchants might find prohibitive, though.
Liability Exposure
Parsing out payments in increments can lead to a few hiccups for which merchants might not be fully prepared. For instance, consider the threat of elevated liability for fraud and delinquent payments. What if the customer doesn’t honor the terms of the purchase? Even with built-in fraud protections and other measures negotiated between lenders and cardholders, issues can arise.
Potential Fees & Risk Exposure
While buy now, pay later chargebacks aren’t really a thing, there is still a lot of uncertainty surrounding any new payment option. Merchants are urged to take risk into consideration for Mastercard Installments, and always have a plan to defend against fraud. Don’t take BNPL purchases for granted. Preparedness and planning are prerequisites for success when adopting a new technology.
While buy now, pay later chargebacks aren’t really a thing, there is still a lot of uncertainty surrounding any new payment option. Merchants are urged to take risk into consideration for Mastercard Installments, and always have a plan to defend against fraud. Don’t take BNPL purchases for granted. Preparedness and planning are prerequisites for success when adopting a new technology.
Can Merchants “Opt Out” of Mastercard Installments?
Ultimately, the benefits of accepting payments through Mastercard Installments will almost certainly outweigh the potential risks. That said, merchants can opt out of accepting these BNPL payments if they choose to do so.
Merchants who wish to opt out of Mastercard Installments will need to contact their payment processor or acquirer and say they want to disable this feature. The process typically involves a formal request, followed by the processor making the necessary adjustments to the merchant's account settings.
Sellers should verify that they expressed a clear preference to opt out, and confirm that the changes have been implemented. We also suggest that merchants review their service agreements and stay informed about any policies or updates that might impact their ability to opt out in the future.
Keep in mind that opting out of Mastercard Installments will probably also mean opting out of other BNPL options. So, merchants that refuse to take Mastercard Installments may be unable to accept other services like Apple Pay Later or Klarna. But, sellers can usually opt back in at a later date if they choose to do so.
Concerned About How New Payment Options Will Impact Your Business?
Mastercard Installments is a great, forward-thinking addition to working payment systems. But, to achieve success, merchants must always plan for the eventualities few can fully avoid.
Merchants and lenders are encouraged to have a solid strategy in place for chargeback and fraud management before they implement any new payment options.
Chargebacks911® is perfectly placed to help you navigate the payments landscape and fight and win against chargebacks. If you think payment industry changes might negatively impact your business, contact us today for a free chargeback analysis.
FAQs
Can Mastercard be used for installments?
Yes, Mastercard Installments allows eligible cardholders to split their purchases into manageable installments at participating merchants. This service provides flexibility and convenience, helping to make larger purchases more affordable.
Does Mastercard offer payment plans?
Yes, Mastercard offers payment plans through its Mastercard Installments program. This service enables eligible cardholders to divide their purchases into convenient, manageable installments at participating merchants.
How does Mastercard buy now pay later work?
Mastercard Buy Now Pay Later works by allowing eligible cardholders to split their purchases into a series of fixed, manageable installments, providing greater flexibility and control over their financial planning. Cardholders can choose this option at checkout with participating merchants, making larger purchases more affordable over time.
Who are the partners of Mastercard installments?
Mastercard partners with various financial institutions to offer the Mastercard Installments program. Some participating banks in the US include Barclays US, Fifth Third, FIS, Galileo, Huntington, Marqeta, SoFi, Synchrony, Cross River, Evolve Bank & Trust, Jifiti, Live Oak Bank, MOCA Financial, and WebBank. These collaborations ensure that cardholders have a seamless and flexible purchasing experience across a wide range of participating retailers.
