With the consumer-oriented “Buy Now, Pay Later” (BNPL) industry set to exceed US$1 trillion in annual gross merchandise volume globally by 2025, Mastercard today announced the next evolution of the payments model with the launch of a new commercial card offering designed specifically for small and medium enterprises.
Mastercard has launched the Mastercard Pay & Split that enables financial institutions to provide small businesses with a payment product that will address the demand for flexible financing options among underserved businesses.
The first-of-its-kind, network-based, open-loop instalments solution to be made available anywhere in the world will also be available to issuers across the Asia Pacific region.
“The card-led product will address the demand for flexible financing options among underserved businesses and help to rekindle growth among the region’s countless smaller operators during a period of continued economic uncertainty,” says a media release.
In the Asia Pacific region, enthusiasm for commercial BNPL products is strong amongst small businesses. Interest is especially high in India and Singapore where 77 percent and 80 percent of respondents respectively expressed interest in using an instalment product specifically created for small businesses, according to a Mastercard-commissioned survey conducted in 2021. Taking a global view, 75 percent of SME business owners who have used instalments for personal purchases said that they would be likely to adopt similar payment solutions for their business.
Drawing on this consumer familiarity with BNPL offerings, Mastercard’s new commercial product has been tailored for the unique needs of small businesses, enabling cardholders to convert any purchase from 80 million merchants worldwide where Mastercard is accepted into monthly or periodic instalments.
With Pay & Split, businesses can easily make instalment finance purchases from suppliers around the globe and better manage cash flow, while eliminating the hassle of managing fragmented payment plans.
Pay & Split also addresses a second critical pain point for SMEs. During the pandemic, accessing credit or finding loans with favourable lending conditions has been a challenge for many small businesses —especially those that lack the financial record that more established businesses typically have. In addition to providing simpler access to financing, Pay & Split will offer a path for these smaller operators to build a credit history.
“Financing has always been a hurdle for small businesses, but the economic impacts of the pandemic have really brought this issue into sharp focus,” says Sandeep Malhotra, Executive Vice President, Products & Innovation, Asia Pacific, Mastercard.
“Many small business owners rely on personal lines of credit or non-bank lenders to help finance their operations, which is not ideal in terms of sustainable business growth. Mastercard Pay & Split brings new credit opportunities to smaller operators who may not meet certain thresholds for a traditional commercial credit card or term loan, but need working capital to stay afloat or expand. It also opens the door for businesses to generate a credit rating, which can then be used to apply for more sophisticated credit products as the business grows.”
Mastercard Pay & Split can be easily implemented by financial institutions by leveraging their existing card issuing infrastructure or by speaking to their Mastercard account manager about the Mastercard Installments Payment Service. A new commercial product code is now available to SME card issuers across the Asia Pacific region that gives them the ability to support a commercial card program where every payment can be split into installments according to parameters set by the issuer.