Buy now, pay later services are installment-based payment schemes that have experienced a surge in popularity over the past few years and have become a prominent part of modern eCommerce. In fact, BNPL hit $1.6 trillion in global market value in 2020, showing a 5% year-over-year increase and outpacing credit card expenditure which declined by 4% during the same period1.
Thus, it comes as no surprise that Visa, the world's second-largest card payment organization, could not miss out on this promising market and launched its own BNPL solution. Find out what makes the Visa Installments platform stand out and understand how it can influence merchants and businesses.
The main goal of Visa Installments is to provide consumers with an additional convenient payment option at checkout. Let’s take a closer look at how this service works for shoppers during the purchase:
The consumers can also select Visa’s BNPL option pre-purchase (while they are still browsing for items to buy) and post-purchase (by converting a recent card transaction into installments).
As mentioned above, there are three main installment payment models: pre-purchase, during-purchase, and post-purchase. These models vary depending on such factors as:
Aside from that, there are other customizable elements of Visa Installments available to financial institutions and merchants via APIs, namely:
1. Plan Creation
Every financial institution that opts in to Visa Installments is responsible for managing its own installment program. Hence, Visa provides issuers with an API that enables them to customize such payment plan attributes as:
2. Eligibility Check
With Visa, merchants, technology platforms, and acquirers can use an API to look up eligible installment plans for a transaction. For instance, they can check the eligibility of a 4-month BNPL loan for all Visa Signature cards from Bank X at clothing stores.
Once suitable options are found, merchants can display these installment plans to consumers during purchases.
3. Plan Selection
Visa offers an API that enables a merchant to confirm an installment plan the cardholder selected for a given transaction.
4. Plan Conversion
This API enables issuing banks to convert a regular transaction into an installment plan post-purchase.
5. Plan Scheduling
Another API offered by Visa enables issuers to make a payment schedule. It will determine the cardholder status and calculate monthly installments that are due for better general ledger management and correct posting to the cardholder statement.
Aside from the general benefits linked to payment method diversity, the Visa Installments system features additional advantages for everyone involved in the payment process:
It’s clear that the Visa Installments service has plenty of benefits, but are there any risks associated with the integration of this system?
Due to the fact that Visa Installments is not offered to the general public through many channels yet, it is hardly possible to point out its downsides. However, the potential challenges can be forecasted by using the experience of Visa’s primary peer, Mastercard Installments, as a point of reference.
Here are some drawbacks lenders and merchants using Visa Installments could potentially face:
Keeping the possibilities of such drawbacks in mind is sure to set up your business for success when adopting Visa’s BNPL solution.
All in all, the Visa Installments system is expected to be of great assistance to merchants and lenders in meeting consumer demand for BNPL solutions and payment method diversity. However, it is essential for businesses to develop a thorough strategy to deal with the platform’s potential challenges before integrating it.
1 - Visa - Installments: Consumers can buy now and pay later
2 - Digital River - Your Passport to Global Commerce