Splitit Gives Banks New Checkout Experience to Reclaim Pay Later Space

Financial institutions (FIs) looking to get a piece of the action in the buy now, pay later (BNPL) space might be wise to investigate their timing.

As FIs have struggled to unlock flexible payment options to their customers during the purchase journey, their more agile competitors have made it their value proposition. In contrast, FIs’ offerings typically focus on post-purchase installment plans, which allow both high interest rates and inflation to become a factor.

But, as Splitit CEO Nandan Sheth told Karen Webster recently, there are options for FIs looking to regain a place in the BNPL market, especially when interest rates and inflation are factored in.

“I’m worried about consumers taking on new loans — no matter if they are short-term loans, or [certain] buy now, pay later loans to afford items they may need — but where the APR is 25% to 35%,” Sheth said.

A more affordable option, according to Sheth, can be found in installment loans offered by banks, with, typically, no interest charges attached.

Post-Purchase Presence

Almost every major issuer in the United States has a post-purchase installment program where consumers can typically take a large purchase off their statements and pay over time.

But where the issuers have come up short, Sheth said, has been in offering those options at checkout — in the midst of the transaction, where affordability can make or break the decision to move ahead and commit to the purchase. The FinTechs focused on BNPL have typically captured that part of commerce, influencing the buying decision in ways the FIs have not been (yet) able to. 

Consumers who opt to pay with their cards may value rewards and trust their banks, noted Sheth.  But the lack of in-purchase offerings, he added, can inhibit what consumers buy, how much they buy and even if they can make the purchase at all.

To that end, Splitit late last month debuted FI-PayLater, which enables FIs to offer BNPL at the point of sale, closing the gap between traditional players and the FinTechs, and giving banks room to play in what Sheth said is the “during purchase” segment, which is in fact a bigger opportunity than has been seen post-purchase.

“We are going to be playing a network role, or a gateway role, in FI pay later” offerings, Sheth said.

In doing so, the economics of the FIs’ installment plans can actually be improved.

Splitit’s single point of access to its unified platform via API lets any issuer initiate installment offers to existing cardholders at checkout across Splitit’s network of merchants. Conversely, any merchant that wants to access issuer offers can do so through that single point of API connectivity.

“We’ve taken away the many-to-many complexity,” Sheth said, “through our orchestration layer.”

New Network Effect

In effect, Splitit is acting as a pay later network.

“We’re serving both sides and simplifying installments,” he said.

Beyond the simplicity, there are a number of other innovations at work, where Splitit is becoming one of the first installment engines that allows the issuer to brand at the merchant checkout, as the card “art” comes up immediately in the midst of the transaction. 

There are also options where issuers are onboarded and can dictate the payment length — three or six installments — and terms, including whether merchants or consumers will pay fees tied to the installments.

The consumer experience is streamlined, too, said Sheth, who added: “We can initiate a one-click checkout for installments because we’re embedded into the merchant’s checkout.” 

Behind the scenes, he said, Splitit will continue to prefund merchants (as has already been seen with post-purchase installments). 

“The issuers don’t have to hope that another third party will take this solution to the merchant,” Sheth said. With Splitit, “They’re partnering with a company that’s 100% focused on card-attached installments.”

What’s on the Horizon

Splitit is testing FI-Pay Later with three banks at present, Sheth said, and will launch with at least one of those banks in the next two months.

“But the tech is fully built,” he said. Over the longer term, Sheth said, the opportunity is there for merchants and issuers to collaborate on marketing, and to jointly expand scale and reach. 

Offering installments at checkout, he said, is also a significant opportunity overseas, as nearly half of Splitit’s business lies outside the U.S.

With FI-PayLater, he said, “We want to equalize the playing field for issuers.”