New research from Splitit and Pymnts revealed that shoppers are doling out twice as much money when they use their credit cards for making interest-free payment installments versus using traditional buy now, pay later plans.
Authors of the report, titled “Merchants’ Evolving Perspective on the Value of Card-Linked Pay Later Plans,” said the research “underscores the high value that card-based installments offer to retailers” and noted that the survey also found that “nearly three-quarters of merchants prefer card-linked installment options over traditional BNPL programs.”
Nandan Sheth, chief executive officer at Splitit, said the survey showed that the median spend on card-linked installments “is over $1,000, compared to $386 on average for traditional BNPL plans.”
“Nearly 90 percent of merchants acknowledge that these card-linked plans drive higher sales conversion and enhance customer loyalty, marking a pivotal shift in the pay-later landscape,” Sheth said. “Therefore, it’s no surprise that nearly three-quarters of merchants prefer card-linked installments, and over a third believe their customers are very or extremely likely to switch merchants to use these plans, a 164 percent increase since December 2023.”
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The report’s authors said as customer acquisition and retention costs continue to skyrocket, “card-linked installments are valued by nearly nine out of 10 merchants (88 percent) to improve customer acquisition and retention. This is in comparison to 64 percent for traditional BNPLs.”
The research also revealed that more than 80 percent of those polled said there’s been an increase in card-linked installments for in-store purchases over the past year, which compares to 67 percent of retailers noting an increase in BNPL use in-store. The poll showed that 37 percent of retailers are now using card-linked installments, which is an increase of 16 percent over the past six months.
“More than one-third of merchants believe that their customers are very or extremely likely to switch merchants in order to use a pay later plan linked to their existing credit card, which is up 164 percent since December 2023,” the report’s authors said.
Sheth said card-linked installments cater to customers who don’t need new credit, but value a faster checkout process. “This segment is being ignored by traditional BNPL lenders,” the CEO said. “Merchants view card-linked installments as incremental to legacy BNPL options, which force consumers to originate a new loan. Additionally, merchants appreciate that keeping installments on an existing card simplifies returns and other back-office processes. This combination is fueling the strong demand for card-linked installments among merchants.”