Some of the BNPL operators, like Klarna, have their own payment rails and charge merchants interchange fees between three percent and six percent of total transaction value for their use.
However, credit and debit cards still figure in the mix. For starters, many BNPL plans offer virtual cards to pay for goods at merchants that haven’t onboarded with them yet. These cards ride on Visa and Mastercard’s rails.
Second, both Visa and Mastercard have launched BNPL initiatives that enable consumers to pay merchants through installments using their payment rails. These so-called “open loop” models allow consumers to pay through installment anywhere where the card brand is accepted. For example, Visa, in its press release announcing its BNPL initiative, explicitly stated that acquirers on its network can activate the ability to enable installments for any of their retailers that accept Visa.
Last, but most important, for the time being a majority of BNPL purchases are paid with either a debit or a credit card. That means indirectly BNPL operators still rely on credit card payment rails.