Credit Card Firms Are Jumping into the Hottest Trend in Fintech

Fintech has been supplanting traditional sources of finance and lending in the past few years at a rapid rate. One of the fastest-growing subsets is the BNPL, or buy now, pay later service.

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  • Replacing layaway plans and traditional credit measures, the industry is adapting to the rapid growth of this niche, which went from $3 billion in 2019 to nearly $40 billion in 2020 just in the US alone.

    Now, Mastercard (MA) is looking to roll out Mastercard Installments, a BNPL service of its own that allows customers to pay back in weekly or monthly installments, including a 0 percent option for payments as short as a few weeks.

    The news come as shares of Mastercard have dropped about 13 percent off of their all-time highs over the past two months, and could prove a catalyst towards a resurgence in shares.

    Action to take: All the credit card companies operate in an oligopolistic environment with high profit margins, which makes them attractive following a drop. Investors who buy now are getting shares at 32 times forward earnings, the lowest valuation since the pandemic. Shares also yield about 0.5 percent.

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  • Traders may like the January $375 calls. They last went for about $11.00, and can likely deliver mid-to-high double-digit returns in the coming weeks on a rebound in shares, even if the overall stock market remains volatile.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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