Nandan Sheth was appointed as CEO of Splitit in January 2022. A seasoned payments industry executive, Sheth brings domain expertise through his work at large payment companies, major banks, Fortune 100 companies and technology startups across North America and Europe.

As consumers demand flexible payment options, we’re seeing growth in credit card-linked installment options that do not involve new loan origination at checkout. Credit card-linked installments can provide a more scalable and streamlined process for issuers, merchants, and consumers alike.

New research from Pymnts and Splitit indicates that nearly three quarters of merchants prefer credit card-linked installment options over traditional buy now, pay later (BNPL) plans. This data shows that nearly 90% of merchants believe general purpose credit card-linked installments boost customer acquisition and retention, compared to just 64% for traditional BNPL installment options.

There are a number of factors contributing to the evolving ‘pay later’ landscape. Higher interest rates and lower approval rates for BNPL transactions are partly to blame. New regulations announced by the CFPB require BNPL providers to abide by some of the same rules that govern credit cards. The immediate effect may be greater consumer protection allowing consumers the same benefits they would receive with a credit card when returning previously purchased goods or disputing fraudulent charges. However, as governments seek to protect consumers more, they may start to require that BNPL providers report consumers’ loans and missed payments as well.

Credit card-linked installment plans are becoming increasingly popular for large purchases, providing a safer and more sustainable way to spread out payments. They are particularly appealing to higher-income consumers who want to buy more with 0% interest card-linked installments. These plans use existing credit lines issued by card issuers and reduce the risks of additional debt with very high APRs.

Here are a few data points on why card-linked installment plans offer a host of benefits for both merchants and consumers: 

• Median spend on card-linked installments is more than $1,000, more than twice the $385 average for BNPL pay-in-4 plans.

• More than a third of merchants now offer these plans at checkout, growing 16% in just six months.

• More than a third of merchants believe that their customers are likely to switch merchants in order to use a pay-later plan linked to their existing credit card, up 164% since December 2023. 

• One third of consumers say they would specifically choose card-linked installments for a big purchase over legacy BNPL options.

• Nearly 60% of consumers who use credit card-linked installment plans do so to manage their finances better, especially for big-ticket items such as home furnishings and appliances

In order to meet growing customer demand for more flexible payment options, merchants will need to understand the various nuances involved in the different modes of flexible payments. Tailoring payment options to target particular customer groups will allow merchants to offer greater personalization along the customer journey.