BNPL Moves In-Store as Installment Payments Evolve With the Times

The recovery of physical retail after the massive rise in eCommerce is bringing about cross-pollination of sorts as popular online payment methods migrate to in-store checkouts.

A clear example of this is the recent news that point-of-sale (POS) provider Ingenico and buy now, pay later (BNPL) firm Splitit are partnering to bring Splitit BNPL to the in-store POS later this year.

Discussing the development with PYMNTS’ Karen Webster, Splitit CEO Nandan Sheth said the linkup with Ingenico is the result of merchant demand and an exhaustive search for the right partner.

“Some of the larger merchants that we’re in discussions with, and/or our merchants today using our service in eCommerce, many of them were asking, when are you going to launch an omnichannel solution,” Sheth said. “We see a fairly sizable opportunity at the point of sale.”

By leveraging Splitit’s unique form of BNPL that uses a consumer’s existing credit card open-to-buy rather than originating a new BNPL loan, combined with Ingenico’s payments-platform-as-a-service (PPaaS) solution, it’s an innovation built for a huge total addressable market.

“We felt that there’s a very large TAM that’s underserved,” Sheth said. “As you know, point-of-sale is three times eCommerce in most markets. When you put both of those together, our criteria from a product strategy standpoint was very much to ensure that this was an embedded experience.”

As a white-label solution, Splitit already operates as an embedded feature in eCommerce checkouts, and Sheth said his quest was to find an ideal partner to do the same in-store.

Many of the POS providers he spoke with gravitated to QR codes, but he told Webster “we resisted” until landing on Ingenico for similarities in their vision for BNPL at the register.

“This experience has no QR code. There’s no registration, there’s no out-of-brand experience,” he said. “You don’t have to use your phone unless you’re using it to tap your card. It’s literally one click, the option that you want [appears], the credit card authorizes, you walk out with your goods, and you pay over six months. That’s the elegance of the solution.”

Read: Splitit and Ingenico Team on One-Click In-Store BNPL

More Power to the Merchant

Planning for the new pairing to be live in-store by Q2 or Q3 of 2023, Sheth said there’s a powerful value prop at the center of this for the merchants who deploy it.

“We want to drive incremental value for our merchants, not just become a deferred payment method to split payments,” he said. Working with retailers to fit into their digital marketing strategies, he described how consumers may get a text or email prompt for a desired high-ticket item but must come to the store to get it. Luxury retail is a prime example.

High-touch, high-ticket luxury retail is an ideal setting for the combination of Splitit and Ingenico PPaaS, and because there is no new BNPL loan being originated, it’s faster too.

Home goods are the other retail segment where he sees strong potential uptake around appliances, furniture, and instances “where you go into a store location and you kind of pick those items out. Even bathroom fixtures. There is a company we’re in discussions with that has, I think, 50 showrooms across the United States. They sell bathroom fixtures and bathtubs and they’re high-end. Those are the two areas that we’re focused on, and once we have some success there we’ll go broader.”

Additionally, Sheth noted that this creates a new payment experience for retailers, and it can be offered to a wider array of consumers, including growing numbers of cross-border shoppers.

“These merchants want a unique experience, but they don’t want to segregate this to a set of customers,” he said. “They want to offer it to all their customers. Many of these clients of ours have international shoppers. In some cases, [it’s] 20%, 25%, 30%. Some have China Union Pay. So the fact that we can support domestic cards, international cross-border cards, and China Union Pay makes it super powerful for the brands that have international consumers.”

Because Splitit is a white-label solution, positive reception from consumers accrues to the retailer for offering a novel way to break a $3,000 purchase into six monthly interest-free installments.

See also: Retailers Say BNPL Boosts Sales, Consumers Say It Keeps Them Coming Back

BNPL for Budgeting

The one possible downside to launching this solution in 2023 is that many consumer credit lines are already tapped out, or nearly so, but Sheth doesn’t see that as an issue for consumers with the available credit. For those right on the edge, this can serve as a budgeting function.

“What’s interesting is when you move outside of those [wealthier] segments we’re absolutely seeing the open-to-buy compress. But I think that’s the power of our solution,” he said. “If you don’t have available credit and you are trying to make a $5,000 purchase and your available credit’s $3,000 then you probably shouldn’t make that $5,000 purchase.”

With the ability to trigger a frugal reaction, Sheth said, “In a strange way, that’s what makes this more responsible for the consumer” as opposed to pure-play BNPLs that he said are “laddering credit lines and laddering loans that are not even in kind of the regulatory infrastructure of consumer lending.”

Looking at Q3 for its first pilot — and possibly Q2 — he said the pact is important because Ingenico is not only a distribution partner, “but we’ve bought the products together so the terminal and Splitit have come together, so we’re doing product innovation. We want to pick merchants that can adopt this quickly and we want to do it right.”

As to the take rate, Sheth waxed pragmatic, saying, “I think it’s going to be a little lower,” but added that “even if the take rate is, say, 3% to 5% less, which is what we’re estimating in the beginning, because the pie is so large, I think our revenue or volume per merchant will be the same, if not higher than an eCommerce merchant of the same size.”