Consumers love paying with installment plans. A recent report confirms that 60 percent of shoppers over the past year chose to pay for their purchases with interest-free installments, and most of those shoppers (45 percent) chose to do so with their own general-purpose credit cards. Even though the consumer is clearly voting with their wallets for more card-attached options, many merchants and acquirers are confused about which plans to offer, and even when to offer them within the customer journey.
Merchants and acquirers must diversify their installment plan offerings to satisfy growing consumer demand. Not only do they need to upgrade their technical capabilities, but they also need to communicate these options clearly in their marketing and other customer-facing touchpoints. The data indicates that 78 percent of merchants plan to enhance their acceptance of card-attached installment plans, with 39 percent of acquirers planning to allow their clients to offer these plans during checkout in the near future.
What’s at stake for the merchants? With nearly two-thirds of high earning consumers — those making more than $100,000 per year — using installment plans over the past year, a great deal. Consider the following:
- The average purchase made with a general-purpose credit card plan in the past 12 months was $1,500, more than double the average purchase prices made with legacy buy now, pay later (BNPL) plans at $685.
- Sixty-one percent of merchants prefer card-attached payments because there’s more transparency in the payments process. Nearly 56 percent cited the reduction in delinquencies for card-based installments users, and 50 percent because they’re meeting demand driven by changes in consumer behaviors.
- One-third of merchants believe that consumers are likely to purchase higher-ticket items when they’re offered the chance to use a card installment plan before checkout.
- Nearly 30 percent of merchants think that consumers will likely purchase more items when presented with the option to use a card installment plan prior to checkout.
Even though these facts are very encouraging for the retail industry overall, there are still some hurdles to overcome. While 50 percent of acquirers claim to support offering general-purpose credit card installment plans during checkout, analysis of the data reveals that, in fact, it’s much lower and closer to 8 percent. And while 30 percent of merchants believe that consumers would prefer to know about their payment options before making their purchasing decisions, more than twice as many shoppers — 66 percent — say that they want to see their payment options before they decide what to buy. Meanwhile, only 4 percent of merchants even offer a card-based installment plan prior to checkout, potentially losing out on much higher average order values and greater customer loyalty.
Traditional BNPL players are under a bit more pressure today than they were a few years ago, making bank-issued card-attached installments a more appealing option for many retailers. As more and more shoppers have stacked pay-in-four plans, there have been greater delinquencies along with higher declines in new loans. Furthermore, consumer preferences are evolving and their usage habits around installment plans have become centered on purchasing price. Merchants report that consumers prefer to use general-purpose credit card installment plans for larger ticket items, while using legacy BNPL options for smaller purchases. Eighty percent of consumers prefer to use legacy BNPL options for purchases under $100, while only 10 percent prefer them for purchases of $1,000 or more.
It’s clear that merchants and acquirers will need to meet customer expectations with more personalized split-payment options. By offering greater flexibility and transparency earlier in the purchasing journey, retailers and brands will turn browsers into buyers by eliminating the last hurdle consumers have for making purchases, especially for bigger ticket items such as furniture, home improvement, health and wellness, travel, and retail.
Colin Mellon is the chief commercial and growth officer at Splitit, a card-attached installments company that uses a consumer’s own existing, untapped credit.
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