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Visa is introducing application programming interfaces (APIs) that enable issuers and merchants to offer installment solutions in-store and online for purchases made with existing Visa cards, per a press release.

US Consumer Sentiments Regarding Installment Loans and Altnerative Financing

The company is partnering with clients around the world like CyberSource, Kotak Mahindra Bank, and PayU to pilot its APIs and plans to make them available to its clients and partners in January 2020 as a part of Visa Next, its new platform for digital payments solutions.

Here’s what it means: Visa is responding to point-of-sale (POS) financing’s popularity and its threat to the firm’s business.

Awareness of POS financing options hasrisenin recent years, and consumers are interested in using them for all types of purchases.Half of US consumers would prefer to use an installment loan rather than other payment options for purchases under $250, meaning that such offerings are gaining steam for more than just big-ticket purchases. 

And they’re set to have a big effect: Business Insider Intelligence forecastsonline credit’s e-commerce payment volume to rise from $27 billion in 2019 to $76 billion in 2024.

As alternative financing increases in popularity, particularly among younger customers who don’t have credit cards but are looking for more flexible ways to pay, POS financing platforms could steal share from credit cards in particular, in turn presenting a threat to networks like Visa and their issuing partners, which are taking note and responding.

The bigger picture: Launching these APIs for POS financing in-store and online enables Visa to compete with both startups in the space and legacy rivals that are already pursuing the market.

  • These offerings can help prevent Visa from being disintermediated, especially because it’s bringing its solutions in-store. As an established company with preexisting merchant relationships, Visa may be able to convince merchants to offer its POS financing solutions instead of, or at least in addition to, those from startups like Klarna, Afterpay, and Affirm that have been largely focused on e-commerce payments. What may make Visa’s offerings most compelling is that they can be used in-store so there’s no gap in their availability, which could bring partnerships and, in turn, volume, to the platform; that’s particularly important considering that Klarna and others have been bringing their solutions in-store.
  • Visa is also keeping up with competitors like Mastercard and Amex that have already made financing plays.Incumbents have responded to the rise in alternative financing options by dipping their toes into POS financing themselves: Mastercard recently purchased Vyze and Amex offers its own flexible financing initiatives. So, it’s important that Visa is introducing its own solution as well to keep pace. For consumers, access to Visa’s solution could make a particular card more appealing, which might encourage top-of-wallet status and promote ongoing spend. These benefits could ultimately boost Visa’s attractiveness as a partner to issuers looking for ways to stand out as POS financing takes off.

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