Embedded Solutions Spur Demand for Card-Based Installments

Colin Mellon, chief commercial officer at Splitit, told PYMNTS that installment plans, when linked to traditional card-based payments, can offer benefits throughout the commerce ecosystem.

But making inroads and competing against buy now, pay later options, he said, requires a wider embrace from acquirers — plugging a gap between supply and demand as consumers want more options to pay, over longer periods of time.

Joint research from Splitit and PYMNTS Intelligence found that more than half of acquirers claim they facilitate general-purpose credit card installment plans before or during checkout. But the reality is that only about 8% enable those options for merchants.

“The gap offers a significant growth opportunity for merchants,” Mellon said.

Mellon noted that most of the card-linked plans offered currently are presented to the consumer after a purchase is made.

“These plans lack the impact of being presented to the customer at checkout, which is a critical moment for influencing consumer purchasing decisions,” Mellon said.

The headwinds are both technical and cultural when it comes to shifting gears and offering installment options as the purchase is being considered at the point of sale, Mellon said. Some FIs might offer integrated checkout solutions, but for acquirers, technological complexities prove daunting and may diminish acquirer enthusiasm to enable those options.

Providers such as Splitit, he said, have a single API that acquirers can use to become an effective orchestration layer for a range of different installment programs. Linking to that API, he said, means that acquirers can help present bank-issued installment solutions to their merchant base, and by extension, those merchants’ end customers.

Competing With BNPL

Asked by PYMNTS about the competitive landscape between card-linked installment plans and buy now, pay later (BNPL) options, he said that card plans and Splitit’s installment payment solutions let consumers leverage their existing cards to take out interest-free loans that don’t require credit checks. The installment options also bypass the pain points tied to BNPL plans, he said, where enrollment requires that consumers offer up sensitive personal data such as Social Security numbers.

“It’s a simple, two-click process,” he told PYMNTS, “and consumers don’t have to leave the site. They click the duration of the [time frame] they want to pay, and press pay to finalize the transaction.”

The transparency of the installment plans, he said, stand in contrast to the legacy BNPL fees and penalties that may accrue if individuals do not pay within a specific window of time, or which may not be fully disclosed.

Card-based installment plans, he said, also have another competitive advantage. As consumers transact, they can still take advantage of rewards and loyalty programs that are features of their current cards and have the same protections from the card networks that have been extant for decades. Merchants also get the benefit of increased conversion rates without taking on the risks associated with consumers defaulting or simply not paying their BNPL obligations, or hiring a third-party collections agency to recover those payments.

“By meeting the customer at the point of sale, and providing an easy, simplified way for them to check out using a payment option they already feel comfortable with (i.e., their cards),” Mellon said, “acquirers drive sales and satisfaction while providing meaningful, value-added services.”