Why Are Merchants and Acquirers So Confused About BNPL and Installment Payment Plans?

Installment or split-payment plans like buy now, pay later (BNPL) enable consumers to align their spending and credit management strategies. PYMNTS Intelligence’s data analysis reveals that 3 in 5 shoppers used installment plans for consumer product purchases in the past year. This use spans all age groups and income brackets. The uptake of these flexible payment options signals a shift to more deliberate and calculated purchasing decisions.

As a result, 78% of merchants plan to enhance acceptance of general-purpose card installment plans. For acquirers, 39% plan to allow clients to offer general-purpose credit card installment plans during checkout. But are these the split-payment plans consumers want the most?

These are a few findings explored in “Divided, Not Conquered: Acquirer and Merchant Confusion Clouds Split-Payments Landscape,” a PYMNTS Intelligence and Splitit collaboration. We based this report on several surveys on this topic: a census-balanced survey of 2,572 consumers conducted from Aug. 8, 2023, to Aug. 12, 2023, which examined the use of installment plans for common purchases; a survey of 50 acquirers conducted from Sept. 1, 2023, to Sept. 25, 2023, as well as 36 follow-up responses gathered from these same acquirers between Oct. 23, 2023, and Nov. 6, 2023; a survey of 100 merchants conducted from Sept. 5, 2023, to Sept. 26, 2023, and a recontact survey of 50 firms conducted from Dec. 7, 2023, to Dec. 14, 2023.

Other key findings from the report include:

The popularity of split-payment plans signals a fundamental shift in consumer finance.

Among split-payment plan options, general-purpose card installment plans are the most popular, chosen by 45% of consumers. Store or merchant card installments and BNPL plans are also prevalent: 37% of consumers use these plans. Acquirers and merchants may need to diversify their installment plan offerings, technical capabilities and marketing messages to meet varied consumer preferences, enhance customer satisfaction and potentially increase sales.

Merchants and acquirers grapple with which split-payment plans most appeal to consumers.

While half of acquirers claim to support offering general-purpose credit card installment plans at checkout, analysis by PYMNTS Intelligence reveals the actual share is roughly 8%. Additionally, just 32% of merchants fully support these credit card plans. BNPL options and merchant or store card installment plans show a similar discrepancy. These discrepancies highlight significant gaps between consumer preferences and the available payment options that merchants and acquirers must address.

Younger consumers prefer immediate, short-term financial solutions.

In the last year, 49% of Gen Z and 52% of millennials used BNPL, with 23% of both demographics increasing their use. These facts suggest that businesses must adapt their payment strategies to meet different consumer groups’ varying needs and habits. Although consumers primarily use installment plans to help manage spending, millennials also seek rewards. Gen Z consumers typically have fewer alternatives to afford purchases, making them more likely to rely on installment plans.

Although consumers are keen to take advantage of installment offerings as they take a more active role in managing their spending, acquirers and merchants remain confused about the definitions and applications. Merchants and acquirers must overcome several challenges to meet consumers’ demands. Download the report to learn more about how acquirers, merchants and consumers think about using installment payment plans for common purchases.