United States based bank holding company focusing on banking, saving accounts, auto loans and credit cards Capital One Financial Corp. (COF) says that it will be testing the buy now pay later product in the course of the year.
The company’s chief executive officer, Richard Fairbank, says they will be conducting this test at a time when competition for consumer loans has been increasing as financial technology company have devised simple ways of offering cheaper financing for purchases.
“We will be testing a beta version of our own ‘buy now, pay later’ product. This test will include point-of-sale loans for customers at a select set of merchants with which it already has relationships,” said the CEO.
The banking sector and its investors have been increasingly worried that the buy now pay later loans might reduce into a potential rebound in lending revenue from customers who use credit cards to borrow.
Fairbank says that they will use results from the test to understand the product better and how they can modify it to appeal to consumers and merchants.
“We’re watching this product closely and certainly not taking this growth lightly. The elephant in the room is the sustainability of the merchant subsidy. This is fueled by merchants’ beliefs that they’re getting incremental volume,” added the CEO.