Ally Financial (NYSE:ALLY) is entering the point-of-sale (POS) installment lending segment through a new tie-up with Mastercard (NYSE:MA). Ally announced Tuesday that its Ally Lending subsidiary has established a partnership with Mastercard's POS installment loan platform Vyze, under which Ally Lending will serve as the financier of the loans.
By doing so, Ally said, it is hopping on a trend among U.S. consumers and retailers. Technological advances have made POS installment lending a relatively quick and easy option for a wide range of items. The bank cited research from FinTech World Report 2019 indicating that retailers utilizing POS installment financing enjoy an average 32% boost in sales, along with a 75% gain in order value.
Under the terms of the Mastercard arrangement, Ally will offer a range of financing options to consumers making purchases ranging from $500 to $40,000. Terms will range from six to 60 months, at interest rates between 9.99% and 26.99%.
"Together, our partnership gives merchants, who want to offer consumers trusted and stable installment loan options, a powerful, digital option," the bank quoted the head of Ally Lending, Hans Zandhauis, as saying.
Mastercard vaulted into the POS installment loan space in April 2019 by buying Vyze, a fintech company that connects retailers with a range of financiers. At the time, citing research from Accenture, it said that such a market was potentially worth $1.8 trillion in the U.S.
Ally did not provide any estimates as to how the Mastercard partnership would affect its business.
On Tuesday, Ally's shares dipped by 1.8%, in contrast to the gains posted by the broader stock market. Mastercard's, on the other hand, rose 1.2% on the day.