Visa's Partnerships With BNPL Players: Smart Hedge or Future Risk?

As consumer spending habits evolve and younger generations move away from traditional credit options, Visa Inc.’s V increasing partnerships with Buy Now Pay Later (BNPL) companies show a smart shift in strategies. Rather than seeing BNPL startups as direct competitors, Visa has opted for a more collaborative approach, maintaining its position at the center of the transaction ecosystem.

Visa is strengthening itself to remain at the forefront of the ever-changing payments landscape by teaming up with companies like Klarna, Afterpay and FIS. These collaborations allow BNPL providers to leverage Visa’s payment infrastructure while driving higher transaction volumes for Visa and expanding the reach and credibility of BNPL offerings. Visa also introduced its own platform solution, Visa Installments, to help issuers and merchants offer flexible payment options.

It continuously puts effort into leading the economy’s digitization process and ensuring rapid growth. In fiscal 2023 and 2024, V’s payment volume increased 6.4% and 6.7%, respectively. In the second quarter of fiscal 2025, it grew 8% year over year. Its processed transactions grew 9% year over year in the same quarter.

Visa’s collaboration with BNPL companies isn’t just a hedge, they are strategic moves to stay ahead of potential disruptions. The real challenge will be keeping their relevance if consumers decide to move away from credit cards permanently, which were ruled by Visa-backed cards.

How Are Competitors Faring?

Some of V’s competitors in the BNPL space include Mastercard Incorporated MA and PayPal Holdings, Inc. PYPL.

Mastercard is stepping up its game in the BNPL space with the introduction of Mastercard Installments. This new program allows banks, lenders, and fintech companies to provide BNPL options through Mastercard’s extensive network. The company is focused on weaving BNPL into its existing card system, which includes features like pre-purchase approvals and financing right at the point of sale.

PayPal has emerged as a major player in the BNPL market with its Pay in 4 and Pay Monthly options. With a whopping 436 million active accounts around the world, PayPal can boost adoption without having to lean on traditional card networks.

Visa’s Price Performance, Valuation & Estimates

Shares of Visa have jumped 13.5% in the year-to-date period compared with the 6.3% growth of the industry.

From a valuation standpoint, V trades at a forward price-to-earnings ratio of 28.88, above the industry average of 23.06.

The Zacks Consensus Estimate for Visa’s fiscal 2025 earnings implies a 12.9% jump from the year-ago period. It witnessed one upward estimate revision in the past seven days against no downward movement.

Visa stock currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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