Fifty-four percent of acquirers — those financial institutions (FIs) that process credit and debit card transactions on behalf of merchants — say they support card-linked installment options, but recent PYMNTS Intelligence data reveals the actual percentage is much lower.
According to our report, “Navigating New Norms: The Use of Card-Linked Installment Plans in Online and In-Store Sales,” which was created in collaboration with Splitit, only about 6% of acquirers surveyed truly offer installment plan payment options linked to credit cards before or during checkout.
Indeed, only three out of 50 acquirers we surveyed offer pay later plans linked directly to credit cards from any FIs before or during checkout, which mirrors similar findings PYMNTS Intelligence uncovered late last year. Additionally, 22% of acquirers surveyed cited third-party integration constraints as something of a barrier limiting their ability to offer credit card-linked installment options.
The data on this variety in timing and type of pay later plan reveals a significant gap between perceived and actual capabilities, highlighting the need for enhanced direct integrations and more consistent installment offerings.
Yet, despite these challenges, opportunities for growth in the pay later payments market remain substantial. Six in 10 consumers have expressed an interest in pay later options when checking out, and those acquirers that innovate and integrate both general-purpose card-linked installment plans and buy-now, pay later (BNPL) plans could be in a better position to capture a larger market share.
Many acquirers recognize this opportunity; 45% of them say they plan to support general-purpose credit card-linked installment plans before checkout in the future, representing a 15% increase since October.
This shift indicates that more acquirers are recognizing the importance of meeting consumer and merchant needs by providing flexible payment options earlier in the purchasing process.
Still, there seems to be a disconnect between the enthusiasm for offering pay later plans and those acquirers actually doing it.
The gap likely stems from acquirers defining their capabilities in differing, if not competing, ways in the market. As mentioned, just 6% of those surveyed make their pay later plan capabilities available before or at checkout. This finding resembles one we discovered last year when PYMNTS Intelligence released “Acquirers’ Navigation of an Uncertain Installment Plan Landscape.”
At the time, 56% of acquirers claimed that they facilitated general-purpose credit card installment plans before or during checkout, but our research reflected a figure closer to 8.3%.
Our more recent data also reflects the uneven distribution of installment options across acquirers serving merchants in various industries and of different revenue sizes.
Last year, general-purpose credit card pay later plans were more prevalent among larger acquirers — those generating $1 billion or more in annual revenue — at 19%, compared to 7.4% reported in our more recent surveys. As the figure above illustrates, the overall concentration of installment plans of any kind in industries such as retail, restaurants and travel and leisure remain much the same.
These sectors reflect somewhat higher implementation rates for general-purpose credit card-linked plans in particular. By contrast, healthcare and education are areas where implementation efforts for this payment option could increase. While healthcare exceeds all sectors (except the restaurant industry) with 7.7% of acquirers offering merchants general-purpose card-linked installment plans, education lags all but eCommerce/retail.
These disparities suggest that sectors with more frequent and varied transactions are more likely to implement general-purpose credit card-linked plans, whereas sectors such as education may require more tailored payment solutions to accommodate their large but regular transactions.
With 61% of consumers expressing a preference for learning about pay later options before deciding what to buy, acquirers may want to consider advancing the availability of these payment methods earlier in the shopping process. Facilitating this shift could significantly enhance customer experience and align more closely with consumer and merchant expectations.
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