Amazon, the nation’s largest retailer, recently began a partnership with Affirm, which will provide pay-later options. And Square, the payments firm run by the Twitter chief executive Jack Dorsey, agreed to acquire Afterpay, another provider, for $29 billion in early August, a deal that will open installment payments to millions of small businesses that process sales through Square’s app.
Visa, another payment processor, said it had teamed with several pay-later companies to help them expand and offer new products, including virtual cards. Visa also furnishes technology to Commerce Bank that provides certain Visa cardholders with an installment payment option. Visa said it expected to expand that program to more issuing banks next year.
Pay-later options still account for only 1.7 percent of online sales in the United States, a segment dominated by credit cards, which accounted for 30.4 percent last year, according to Worldpay, a payment processing firm.
But pay-later’s share is expected to nearly triple to 4.8 percent of U.S. sales — or $79.7 billion — by 2024, Worldpay estimates. They’re already more established overseas: Pay-later accounts for 23 percent of online transactions in Sweden and almost 20 percent in Germany, and the method is also popular in Australia, Finland, New Zealand and Norway.
Mastercard’s program will provide consumer protections commonly associated with credit cards, including zero-liability fraud protection and the ability to challenge unrecognized charges, the company said.
“Mastercard is a trusted brand, as are its bank partners, and that counts for a lot with consumers,” Ms. Schmeltzer said. “That being said, brands like Klarna and Afterpay have a large and growing — and apparently very loyal — consumer base. It is going to be a very interesting race to watch.”
