Study Finds Offering Installment Payment Options Before Checkout Can Boost Conversion

Consumers have developed an appetite for split-payment plans of all sorts. Also known as installment payment plans, these break up purchases into smaller, scheduled payments over time. Though the concept is simple, data reveals a gap between merchants’ perceptions of split-payment plans and their actual offerings.

Getting clarity on these options is increasingly important. PYMNTS Intelligence found that 1 in 5 merchants report the most common complaint they receive from consumers is that they cannot pay how they want. Nearly the same share of merchants said a lack of buy now, pay later (BNPL) options is their most commonly received complaint.

These are just a few key findings in “Unpacking Merchant Strategies and Consumer Demand for Flexible Payment Plans.” This report, a PYMNTS Intelligence and Splitit collaboration, examines merchants’ current support of and interest in offering various installment plans. It draws on insights from a survey of 100 merchants conducted from Sept. 5 to Sept. 26, 2023, and is further grounded in data from a recontact survey of 50 firms conducted from Dec. 7 to Dec. 14, 2023. This second survey uncovered the underlying confusion among merchants about installment payment options, highlighting the challenges merchants face in a rapidly evolving retail landscape.

Other findings from the report include:

When merchants offer installment payment plans and when consumers prefer merchants to do so differs.

Bringing split-payment plans in line with consumer preferences requires merchants to communicate the offer before checkout. Although 30% of merchants believe consumers want to know about these options before deciding what to buy, just 4% of merchants prefer offering a bank-issued card installment plan before checkout. BNPL options fare a little better, with 35% of merchants highlighting these options before online checkout, which could inform merchants’ future split-payment strategy.

Merchants largely benefit from offering installment plans, but half report increased chargebacks and difficulties integrating systems.

Roughly half of merchants that offer split-payment plans report improved customer satisfaction and increased sales. Still, these benefits come with a cost. Merchants encounter several challenges when implementing these options, though not so significant as to tip the scales.

For example, half of surveyed merchants report that general-purpose card installment plans, such as those offered by banks and networks, specifically created difficulties when integrating different systems. In contrast, 40% of those offering merchant plans reported integration challenges when implementing merchant or store card options. Just 19% of those offering BNPL said the same.

Most merchants plan to innovate the installment payment plans they offer customers.

With general-purpose card installment plans seeming to be a reliable route to increased sales and improved customer satisfaction, nearly 4 in 5 merchants plan to improve or are currently improving their ability to accept these payments. Interestingly, the largest firms are the least likely to be innovating or planning to innovate within the next year. Fifty percent plan to innovate in the future.

As consumer preferences shift toward more flexible payment solutions, merchants should leverage detailed consumer behavior data to tailor their offerings. The merchants who best align their split-payment offerings with consumer demand stand to see gains in sales and customer satisfaction. Download the report to learn more about how merchants are working to meet consumers’ demand for a variety of split-payment plan options.