Capital One CEO Announces Plans to Test Buy Now Pay Later Product

Capital One recently announced that it will test a Buy Now, Pay Later (BNPL) product later this year, which will include point-of-sale loans for customers at a specific set of merchants with which it already has a partnership. Competition for consumer loans has increased as more fintech firms provide merchants with simple ways to offer cheap financing to consumers.

“We will be testing a beta version of our own ‘buy now, pay later’ product,” said Richard Fairbank, Capital One Chief Executive, according to Reuters. The company will begin beta testing the product with existing customers later this year.

Banks have been increasingly worried that BNPL products could cut into a potential rebound in lending revenue from credit card users, as many customers have paid down credit card debt during the pandemic. Some customers have expressed being tempted by BNPL options to borrow for items they want, only to fall behind in payments and acquire interest.

Fairbank noted that Capital One will use data from the beta tests to better understand BNPL products and how they appeal to both consumers and merchants. The company is “watching this product closely and certainly not taking this growth lightly,” he said. He also stated that the products have become more popular among merchants who are more willing to subsidize interest costs.

American Banker highlighted that BNPL options such as Affirm and Afterpay have become increasingly popular among younger customers who wish to pay off purchases over time without interest. Offering a BNPL option makes the most of consumers’ money, as it charges merchants a fee every time consumers use the product at checkout.