Merchants Not Offering Pay-Later Plans May Miss on End of Holiday Sales

clothes store clerk and customer

As the year comes to an end, most consumers have completed their holiday shopping, although there were still stragglers and undecided shoppers deep into December. Market data reveals that in the last days of the campaign, merchants seem to have reduced their promotions and discounts, as PYMNTS Intelligence reported. The early start of Black Friday discounts in October likely contributed to the reduced emphasis on discounts in December, and as merchants have seen the majority of consumers concentrating their shopping on high-intense promotion days, some retailers likely looked to buoy profits by reducing discounts.

One strategy merchants can implement to re-engage undecided buyers and boost sales is to offer installment payment or split-pay plans. According to a recent PYMNTS Intelligence study, 68% of installment plan acquirers think business clients would be very likely to sell higher-priced items or services if they offered card installment plans to clients before checkout. This constitutes an opportunity for retailers to recover their margins.

Acquirers’ Navigation of an Uncertain Installment Plan Landscape,” a PYMNTS Intelligence and Splitit collaboration, examines consumers’ use of installment plans for completing common purchases and draws insights from an original survey of 50 acquirers. The installment plans analyzed in the study include general purpose credit cards, merchant or store card–based plans, and buy now, pay later (BNPL) options.

installment plans

Only 38% of acquirer respondents enable merchant/store card installment plans, and 32% offer explicit support for BNPL schemes. Consumers can split credit card payments into installments after the purchase at their bank, but only 8% of acquirers support splitting purchases with general purpose card installments at the point of purchase.

This is contrary to what consumers demand, as the PYMNTS Intelligence and Splitit study finds most consumers want card-attached installment options and want the merchant to offer them prior to purchase. Hence, enabling split-pay options, whether via credit cards, store cards, or BNPL, may represent a missing opportunity to foster additional sales of gifts, consumer services, and nonessential retail products, but also in indulgent spending.

Shoppers who engage in indulgent spending also tend to be more active in making payments linked to credit cards and BNPL schemes, per another PYMNTS Intelligence research. Specifically, among these indulgent shoppers, credit card usage surges by 20% compared to those who do not engage in nonessential spending. BNPL usage skyrockets to 85% higher.

Acquirers generally support the idea of offering pre-transaction installment plans, but the capability to set up these plans at checkout still lags behind consumer demand. Merchants should take advantage of the opportunity to provide consumers with flexible payment options at checkout, which could enhance customer satisfaction and boost sales in the end.