Just when you thought buy now, pay later (BNPL) couldn’t make any more headlines, this week saw Mastercard enter the space with a “build your own” installments capability enabled on the back end by, of all things, open banking, through Finicity in the U.S. This delivers BNPL capability to some 78 million merchants using Mastercard rails. That was on top of indications that BNPL is being used increasingly for bigger-ticket luxury purchases. It was also a big week for Amazon Alexa and the future of spoken word commerce.
As for Mastercard’s masterstroke in BNPL, Deen said, “I think there’s just a trend generally … for traditional financial companies, and banks specifically, losing to some more innovative methods. In the case of buy now, pay later, [it’s] the ability to defer payments and to be able to buy things sooner rather than later. Open banking is something that’s been prevalent in Europe for a long time. In North America, for many reasons, it’s been more complicated. But we’re seeing more of a push toward that, so it doesn’t become an impediment to innovation.”
With open banking seen as a bit of an outlier and a perennially hot topic that has yet to fully materialize in the U.S., Deen called out legislators for being slow to act, adding that “there are so many banks, especially in the U.S., and [among] smaller and medium-sized banks … I think there’s going to have to be some kind of push in order to do that. With open banking, it also reduces the friction of switching financial providers, so it’s kind of a catch-22.”
Deen foresees an expansion and democratization of BNPL, noting that the benefit of running on Mastercard and bank rails is that “you can get innovative programs, like buy now, pay later, which arguably has been around for a long time, but now it’s quicker in terms of the digitization of that process. I think we’ll see more of those types of innovations around FinTech, generally, whether it’s coming from a bank or from a Silicon Valley startup.”
As for Mastercard’s diving into BNPL specifically, Deen said, “It’s built into their DNA,” and thinks we’ll see more of it from other big players.
“Without a doubt, [for] traditional issuers and credit card companies, this is right in their wheelhouse, and … there’s no reason they shouldn’t be able to innovate very quickly with [BNPL] and become the de-facto standard for this, no different than … deferring payments. You can just do it on a specific item.”
Related news: Open Banking, BNPL and the Transformation of Banking
The week also saw PYMNTS publish back-to-back studies from Amazon Web Services and RightPoint, respectively, dealing with the evolution of big-ticket purchases and BNPL’s move into the luxury space — a pivot away from the cosmetics and fast-fashion that started it all.
“I think [BNPL] conveys to more premium brands,” Deen said. “Traditionally, they’d be in storefronts, and they would have a very bespoke experience. I think they need to find a way to digitize that process and personalize it … like [using] augmented reality to see what you would look like in a suit or a luxury item, a purse, whatever it may be. There’s just a larger trend to create a much more premium experience and increase the number of channels in which you can sell to customers.”
The conversation took a quick detour from luxury and BNPL purchases to Amazon’s upscale makeover announced this week, capped by unveiling its third annual star-studded fashion show, this time with Rihanna’s Savage X Fenty lingerie brand leading the way.
Deen said, “Luxury conveys a certain experience or a certain kind of aspirational lifestyle, and what is important is how you position that and share that experience, whether it’s digitally or in person through touching and feeling.”
He continued that “it talks to a larger trend with the traditional way of shopping in terms of Amazon, and that’s great, but we’re seeing more influencers leveraging channels like Instagram and TikTok to provide social proofs on luxury and lifestyle items. I think we’re going to see more of those channels being active as it relates to luxury goods and items.”
We can expect to see this reflected in holiday selling, as Deen said, “I think there’s pent-up demand without a doubt. I think people are, dare I say, kind of over the challenge of being at home. And I think it’s going to be a blockbuster retail year.” He added that BNPL is teaching consumers not to “defer experiences, and as a result, I think that’ll transition to the retail channel and how people will be purchasing over the holiday season.”
Speaking of all things Amazon, Alexa dominated the mid-week news cycle, as the eCommerce giant unveiled a range of new applications and hardware, all pushing voice to the next level.
As PYMNTS reported, “the company previewed several new devices and reported that customers have connected more than 200 million smart home devices to Alexa and are connecting millions of new devices each month. The headline-grabber was a home robot named Astro, which features Alexa on wheels. The device is pitched by Amazon as a household robot for home monitoring, with Alexa. It is equipped with a camera, is controlled by an app when the homeowner is away and is able to navigate around obstacles.”
Deen simplified matters considerably, saying, “It comes down to Amazon [wanting] to be part of your life. They want to be into the fabric of it, whether it’s helping to care for elderly parents or making sure your family is safe and secure. And I can essentially make a purchase, whether it’s a sundry item like toothpaste or toilet paper, or higher-margin items. Whether it’s voice, video, any channel, any way you can make a purchase, I think Amazon wants to facilitate that.”