Why Merchants Prefer Card-Linked Pay Later Options

Merchants are increasingly recognizing the value of offering general-purpose credit card-linked installment plans. In fact, 37% of merchants now provide these installment plans at checkout. This shift — a 16% rise since December 2023 — highlights how rapidly consumer demand for flexible or pay later solutions has expanded. More merchants are leveraging consumers’ growing interest in these plans, which, in turn, enhances customer satisfaction and drives higher spending.

With competition intensifying across the retail sector, understanding how these pay later options impact consumer behavior and merchant preferences is crucial for businesses aiming to stay ahead.

These are just some of the findings in “Merchants’ Evolving Perspective on the Value of Card-Linked Pay Later Plans,” a PYMNTS Intelligence and Splitit collaboration. This edition examines merchants’ current support of and interest in offering various installment plans. It draws on insights from an original survey of 100 merchants with knowledge of and leadership responsibilities in accounts receivable, consumer billing and collections, and finance or financial operations. We conducted this survey from March 7 to March 28.

Other findings from the report include:

Merchants prefer customers finance installment payments on their general-purpose cards over BNPL providers.

For in-store transactions, merchants say consumer use of general-purpose credit card linked pay later plans is growing more than buy now, pay later (BNPL) use. Eighty-two percent of merchants report an uptick in the use of these installment plans in-store in the last year. In contrast, fewer merchants reported increased BNPL use in-store in the same period.

Consumers spend more using general-purpose card-linked installment plans.

Pay later solutions and increased consumer spending share a strong link. Data shows customers spend the most using general-purpose credit card-linked installment plans. The median transaction amount for these plans is $1,500, compared to $875 for merchant or store card-linked installment plans. Meanwhile, the median transaction for BNPL is just $386. The report explores the benefits merchants receive from offering pay later options.

Offering pay later plans leads to fewer customer complaints about late payments.

Many merchants adding pay later options note difficulties with initial implementation. For example, 70% of merchants reported barriers to entry such as integration challenges or high startup costs. Merchants wanting to keep up with consumers’ demand for new payment options need to know what frictions they may encounter when weighing whether to adopt pay later plans. In addition, providers need to identify and alleviate pain points to drive adoption.

More than one-third of merchants think their customers are highly likely to switch to merchants offering pay later plans. Download the report to learn more about how merchants leverage the opportunities general-purpose credit card-linked installment payments present.