The Rise of Installment Plans: How BNPL Services Are Changing Consumer Spending

The Rise of Installment Plans: Why Pay All at Once?

As consumers navigate through the checkout process, they are increasingly being presented with the option to break up their payments into installments, similar to the popular “buy now, pay later” services that have gained traction in recent years.

During the pandemic, services like Afterpay, Affirm, Sezzle, Klarna, and others saw a surge in popularity as people turned to online shopping and sought flexible payment options. While the initial growth has slowed down, the impact of these installment plans on consumer spending habits is just beginning to unfold.

One such consumer, Aaron Gans, a 37-year-old resident physician in New York City, recently took advantage of an interest-free installment plan offered by his American Express Platinum card. He split the cost of flights to Taiwan and South Korea into 12 equal payments, allowing him to enjoy some leisure activities without feeling like he was accumulating debt.

The trend of installment plans has not gone unnoticed by major credit card issuers and retailers. Companies like American Express, Mastercard, Barclays, and Walmart have introduced their own installment programs to compete with standalone BNPL services. This shift in the market has led to a slowdown in BNPL usage overall, as consumers have more options to choose from within their existing financial tools.

While installment plans offer convenience and flexibility, they are also raising concerns about enabling overspending, particularly among riskier borrowers with shaky credit and limited financial resources. However, for many young people and parents facing financial strain, BNPL loans have become a lifeline for managing expenses.

As the market continues to evolve, credit card issuers are focusing on attracting higher-income users with their installment features, while standalone BNPL services cater to cash-strapped borrowers. The competition is driving innovation and improvements in customer satisfaction, with mainstream brands like American Express, Chase, and Citi leading the way in offering top-rated BNPL options.

Ultimately, the choice between using standalone BNPL services or sticking with a credit card’s installment feature comes down to individual preferences and financial circumstances. While some consumers may prefer the rewards and perks offered by traditional credit cards, others may find standalone BNPL services more accessible and convenient for their needs.

As the landscape of consumer credit continues to evolve, experts predict more experimentation and innovation from lenders to meet the diverse needs of consumers in an increasingly complex financial environment.