Mastercard has launched what it claims is a world-first “Buy Now, Pay Later” (BNPL) commercial card solution for small business financing across the Asia pacific region.

“Accepted at 80 million merchants worldwide, the card-led instalments product will empower small businesses to get capital as they gear up for post-pandemic recovery,” its press release announced.

Noting that the consumer-oriented BNPL industry set to exceed US$1 trillion in annual gross merchandise volume globally by 2025, the group added that the launch of a new commercial card offering designed specifically for small and medium enterprises (SMEs) represents “the next evolution of the payments model.”

Keen response

The new card is called Mastercard Pay & Split and enables financial institutions to provide Asia Pacific small businesses with what Mastercard calls the first-of-its-kind, network-based, open-loop instalments solution for payments to be made available anywhere in the world.

Now available to issuers across the Apac region, the card-led product will “address the demand for flexible financing options among underserved businesses and help to rekindle growth among the region’s countless smaller operators during a period of continued economic uncertainty.”

Across region, enthusiasm for commercial BNPL products is reported to be strong among small businesses. Interest is especially high in India and Singapore where 77% and 80% of respondents respectively expressed interest in using an instalment product specifically created for small businesses, according to a recent Mastercard-commissioned survey. Taking a global view, 75% of SME business owners who have used instalments for personal purchases said that they would be likely to adopt similar payment solutions for their business.

“Drawing on this consumer familiarity with BNPL offerings, Mastercard’s new commercial product has been tailored for the unique needs of small businesses, enabling cardholders to convert any purchase from 80 million merchants worldwide where Mastercard is accepted into monthly or periodic instalments,” said the group. “With Pay & Split, businesses can easily make instalment finance purchases from suppliers around the globe and better manage cash flow, while eliminating the hassle of managing fragmented payment plans.”

Pay & Split also aims to address a second critical pain point for SMEs. During the pandemic, accessing credit or finding loans with favourable lending conditions has been a challenge for many small businesses — especially those lacking the financial record that more established businesses typically have. In addition to providing simpler access to financing, the new card will offer a path for these smaller operators to build a credit history.

Credit rating access

“Financing has always been a hurdle for small businesses, but the economic impacts of the pandemic have really brought this issue into sharp focus,” said Sandeep Malhotra, Executive Vice President, Products & Innovation, Asia Pacific, Mastercard. “Many small business owners rely on personal lines of credit or non-bank lenders to help finance their operations, which is not ideal in terms of sustainable business growth.

“Mastercard Pay & Split brings new credit opportunities to smaller operators who may not meet certain thresholds for a traditional commercial credit card or term loan but need working capital to stay afloat or expand. It also opens the door for businesses to generate a credit rating, which can then be used to apply for more sophisticated credit products as the business grows.”

Mastercard adds that the card can be easily implemented by financial institutions by leveraging their existing card issuing infrastructure or by speaking to their Mastercard account manager about the Mastercard Instalments Payment Service. A new commercial product code is now available to SME card issuers across the Asia Pacific region that gives them the ability to support a commercial card program where every payment can be split into instalments according to parameters set by the issuer.