Capital One Financial is reportedly preparing to pilot a ‘Buy Now, Pay Later’ (BNPL) product this year, as the market for BNPL services continues to evolve rapidly.

As part of its BNPL entry, the firm is planning to test point-of-sale loans for customers at its existing merchant partners, Reuters reported.

Capital One CEO Richard Fairbank has been quoted by the news agency as saying at a Barclays investor conference: “We will be testing a beta version of our own BNPL product.”

Fairbank added that the company will now use the data from the test to understand the offering better and to analyse how to garner the attention of both merchants and consumers.

“We’re watching this product closely and certainly not taking this growth lightly,” he added.

Fairbank attributes the sudden popularity of the BNPL offerings to support from venture capitalists as well as subsidised interest costs by merchants.

Fairbank further said: “The elephant in the room is the sustainability of the merchant subsidy. This is fuelled by merchants’ beliefs that they’re getting incremental volume.”

The US-based credit card issuer’s latest move comes at a time when the consumer loans segment is facing increasing competition from tech firms, which enables merchants to offer cheap financing options for purchases.

Last year, Reuters reported that Capital One decided to stop its customers from using their credit cards to clear BNPL instalment dues citing risk concerns.

At the time, a spokeswoman for the firm said that the decision does not impact customers who used debit cards or checking accounts for BNPL purchases.