(Reuters) - Credit card issuer Capital One Financial Corp will test a “buy now, pay later” product this year as competition for consumer loans builds from financial technology firms providing merchants with easy ways to offer cheap financing for purchases. “We will be testing a beta version of our own ‘buy now, pay later’ product,” Capital One Chief Executive Richard Fairbank said at a Barclays investor conference on Monday. Fairbank said Capital One’s test will include point-of-sale loans for customers at a “select set of merchants” with which it already has relationships. Banks and bank investors have been increasingly wary that ‘buy now, pay later’ loans might cut into a potential rebound in lending revenue from people who used credit cards for borrowing purposes. Many customers have paid down credit card balances during the coronavirus pandemic and eliminated interest charges. But some have described here being tempted by "buy now, pay later" plans to borrow for items they want only to then fall behind here on payments and run up interest charges. Fairbank said that Capital One will use knowledge from the tests to understand the products better and how they can appeal to merchants and consumers.“We’re watching this product closely and certainly not taking this growth lightly,” he said. Fairbank said the offerings have become suddenly popular due to support by venture capitalists and the willingness of merchants to subsidize the interest costs. “The elephant in the room is the sustainability of the merchant subsidy,” Fairbank said. “This is fueled by merchants’ beliefs that they’re getting incremental volume.”