- Visa has announced the launch of a new payment installment service, set to challenge Australia’s Afterpay.
- The pilot program allows existing Visa cardholders to pay off a purchase from select retailers in a similar way to Afterpay but without having to sign up for an app.
- The service will be available in 2020 and comes as Afterpay faces growing scrutiny from regulators.
If you’ve entered a shop or purchased something online in the last year or two, you would have noticed signs announcing the option of using Afterpay.
The Australian ‘buy now, pay later’ service allows shoppers to purchase their items in-store or online and then pay for them over four installments. Afterpay allows shoppers to bypass the hassle of applying for a loan or credit card before purchasing an item, but now credit card giant Visa is jumping on board with the payment scheme.
Visa announced a pilot program where certain retailers will allow shoppers to pay for their items in “smaller, equal payments” over a set period of time using the Visa card they already have. The payments can be made on particular items instore, online or while travelling abroad.
Sam Shrauger, Visa’s senior vice president and global head of issuer and consumer solutions, said the company’s instalment solutions are “changing the game” by allowing shoppers to use it without having to download an app or get a credit card.
“We expect instalments to become a foundational method of payment at checkout for both domestic and cross-border commerce payment transactions,” he said, according to Reuters.
Payment instalment services have gained popularity around the world. According to the Visa statement, Euromonitor International found that in 2017, instalments have been growing 15 percent year on year – twice as fast as credit cards.
Investment bank UBS found more than 10 percent of Australians use Afterpay and its fellow competitor Zip Co, since the instalment solutions were introduced in Australia, according to Reuters.
Sean Sequeira, chief investment officer at fund management company, Australian Eagle said threats from large companies like Visa, were “making some investors think twice about Afterpay”, Reuters reports.
In June, Afterpay announced plans to raise a minimum $300 million from investors to support its international growth plants.
However, this came after the company was investigated by Australian financial intelligence agency AUSTRAC for potential non-compliance with anti-money laundering and counter terrorism financing laws.
The Reuters report added that the majority of Afterpay’s customers don’t have a credit card account and Visa would likely take a long time to get its card issuers to sign up to its instalment service.
Visa plans to have the new instalment option available in 2020.