Visa enters Buy-Now-Pay-Later market in challenge to Paypal,Klarna and others

Karthik Subramanian

Visa has said that it has made available, APIs for Buy-Now-Pay-Later (BNPL) which its card-issuing partners can make use of in their integration so that these services can be offered by merchants during the checkout by the user.


The BNPL market has been the focus of attention over the last few months and these services have grown tremendously during this period. We have also been seeing major players like Paypal and others (probably including Apple) enter into this space putting startups at risk. Some startups have been smart enough to realize the entry of such majors and have got investors to fund them and have pushed their growth and consolidated their position through acquisitions.

Visa is rolling out these services in the US, Malaysia, Canada, and Russia for now and it has set up a BNPL website that contains APIs for the card-issuing partners to use to integrate these services for their merchants. Visa says that users usually use BNPL services for high-value transactions like buying furniture or electronics and then they prefer to pay back the amount in three or four installments interest fee and thus avoid charges. For this, the merchants need to pay the BNPL companies a fixed fee for their services.

This would place Visa in direct competition with Paypal which has also introduced its BNPL services recently. But the major difference between these 2 services is that for Paypal, there is an additional level of verification to see the creditworthiness of the user while in the case of Visa, this is not done. It has created a separate network of merchants and card issuers for such verification and also uses its card verification processes to add to the risk assessment and since this is completed earlier in the processing pipeline, such assessment is not required at the checkout for the user.

The BNPL space is especially famous among online shoppers and the latest generation of users who find it easy and user-friendly and can also avoid high-interest rates and other fees. It also is very useful for online shopping as the users need not worry about refunds if they return the goods after purchase. It is this convenience that has spurred on many players to enter into this segment in the hope of roping in users to their platform and make them stay there and not allow them to leave for want of options. This sector is expected to be extremely lucrative in the coming years.

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