It might be a quiet time in banking and payments as August draws to a close, but news stories continue to bubble up from the Buy now, pay later (BNPL) sector. In the United States, Mastercard's Vyze platform for alternative financing at the point of sale has welcomed on board its first lender specialising in instalment loans. The debutante is Ally Lending, a unit of Ally Bank. "In today's economic environment, flexible, affordable financing options that protect consumers' and businesses' long-term financial health have never been more important," commented the head of Ally Lending, Hans Zandhuis. Readers will recall that Ally Financial's ambitious plan to buy CardWorks and move beyond its traditional specialisations, such as vehicle loans, was called off as the pandemic took hold, but one thing was clear from the episode: Ally wants to significantly broaden its financing options. For its part, Vyze was bought by Mastercard just over a year ago, the global scheme attracted by the simplicity and power of the fintech's merchant-focused APIs.
Another story involving the shift to instalments at the point of sale comes from across the Atlantic. Afterpay, the Australian trailblazer that has already met with significant success in America and Britain, has announced that it intends to complete the acquisition of Spanish BNPL provider, Pagantis, by the end of the year. The move marks AfterPay's first foray into the post-Brexit European Union, with the planned takeover allowing it to rapidly commence operations not only in Spain, but also in neighbouring Portugal and France as well as across the Mediterranean in Italy. Worldwide, the company is now approaching ten million users, with over half that number currently active. "Contrary to traditional credit models, Afterpay is a free service for customers who pay on time," said the company in a previous statement that usefully sums up its business model. "Afterpay generates the majority of its revenue from merchants who choose to provide Afterpay as a service, rather than merely a form of payment."
As Ant Group prepares for its initial public offering in Hong Kong and Shanghai, eye-watering numbers have been emerging about its Alipay wallet's reach and power. In China alone, Alipay has 900 million users for example, a base responsible for $16 trillion worth of transactions in 2018, a year-on-year rise of about twenty percent. Enabling credit is a key function of the app, responsible for $290 billion of lending to small business and individuals in that year. Over 90 percent of the payments market in China is controlled by Alipay and arch-rival WeChat Pay, both of which have leveraged the ease and flexibility of the QR Code to unlock a unique array of uses from in-store payments and food ordering to ride-hailing and insurance. Chinese consumers also rely on the two leading super-apps for bill payments, bank account management, P2P transfers, mobile top ups and ticket purchases for public transport.
Finally, the accelerated rate of e-commerce adoption has led to a curious consequence in Japan, where issuers are finding themselves running out of new numbers to bestow on cardholders. It is not just the pandemic's effects that are at work here; the government has also strongly incentivised card usage by offering what amounts to a partial sales tax rebate for shoppers paying by card rather than cash in some shops. The move was introduced last October in conjunction with consumption tax being raised by a quarter. One would have thought the customary 16 digits sufficient to keep the market supplied with fresh card numbers for decades to come; however, the first six are reserved for more general identifiers such as a country code, leaving a mere ten numerals at issuers' disposal. Thirteen years ago, the publishing industry had to add three digits to its individual serial number for each book. Could the time be coming when such a move is necessary for payment cards issuers worldwide also?
To end, links to some other stories of interest this week...
Europe: JCB announces expansion of partnership with Viva Wallet
Global: EVO Partners with OTI to provide solutions for unattended retail
Ireland: Leading bank switches to flat-fee subscription model
UK: Regulators approve Visa's acquisition of Plaid
US: Amazon's latest grocery store concept opens in Los Angeles
The Weekly News Digest from Argus Advisory Research highlights significant developments in payment cards, digital payments, acquiring, processing, retail banking and consumer credit. Our writers and researchers frame these items in contexts such as historical, sectoral and regional trends, adding a layer of value often missing from the rolling news cycle.
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