MCLEAN, Va.—Capital One will begin testing a buy now, pay later product this year as competition for consumer loans builds from financial technology firms providing merchants with easy ways to offer cheap financing for purchases.
Capital One Chief Executive Richard Fairbank told Reuters Capital One’s test will include point-of-sale loans for customers at a “select set of merchants” with which it already has relationships.
Fairbank said BNPL offerings have seen a surge in popularity due to support for solutions from venture capitalists and the willingness of merchants to subsidize the interest costs.
“The elephant in the room is the sustainability of the merchant subsidy,” Fairbank told Reuters. “This is fueled by merchants’ beliefs that they’re getting incremental volume.”