Why Credit Card Instalments and BNPL can co-exist

“Instalment payments” has split into two different categories: products that issue new credit at checkout, and card-linked instalments, which use the credit a shopper already has. The two solve different problems for very different baskets. Building a checkout strategy around that difference, rather than around a single instalment provider, is one of the more overlooked levers for merchant growth.

 

Ask most retailers what “buy now, pay later” means, and they’ll describe the same thing: a shopper splits a purchase into a handful of payments, often with no interest, decision made in seconds. It’s a fair description of a category that has gone from a niche checkout option to something many shoppers use regularly, particularly among younger shoppers. What gets missed in that description is the split.

 

 

Two types of instalment payments - two different baskets

The first, and more familiar, is what most people mean by BNPL: a shopper is extended a new, short-term line of credit at the point of sale, repaid over a number of months. It’s quick, it’s low-friction, and it’s built for the everyday, lower-consideration purchase. A typical BNPL order in the UK sits somewhere between £50 and £150, on things like fashion, beauty, accessories and smaller electronics, often taken out by a debit card holder using a short-term loan for that month’s purchase.

 

The second is new: card-linked instalments. Here, no new line of credit is created and the shopper takes on no new credit exposure. The shopper is simply given more time to repay a purchase against a credit card they already hold, using an existing limit their bank has already assessed and extended to them. These shoppers don’t need more credit. They need more time. That structural difference shows up immediately in the basket: the average card-linked instalment purchase is around £600, and because there’s no new credit being underwritten, orders can run into the thousands of pounds. Think a £1,500 television, a £2,500 sofa, or a £3,500 road bicycle: purchases a credit card holder is entirely willing to make, but would rather spread over a few months than pay for in one go, and too large for most BNPL products to touch in the first place.

 

Put the two side by side and the difference is clear. A £70 BNPL purchase and a £1,500 card-linked instalment plan are not the same transaction, even though both show up at checkout under the same “pay in instalments” label. One is a new debt sitting alongside whatever else a shopper owes; the other is simply more time to pay, on credit that already exists. Different shopper, different purchase. Confusing the two, or assuming one instalments provider can serve both moments, is where merchants start making the wrong call about what to put in front of a shopper.

 

 

Why “either/or” is the wrong question

The instinct for many merchants has been to pick a lane: sign with a BNPL provider, or skip instalments altogether. That’s the wrong framing. Because the two categories serve genuinely different transactions, they don’t cannibalise one another when offered side by side. They become two complementary revenue streams rather than one crowding out the other.

 

A merchant offering only BNPL is, in practice, invisible to the credit-card-holding shopper trying to spread a £1,800 purchase, because the product was never built for that moment. A merchant offering only card-linked instalments is missing the higher-frequency, lower-value shopper who wants a fast decision on a £60 basket. Offer both, matched properly to the purchase, and a merchant stops losing shoppers to a checkout mismatch. That shows up directly in average order value and conversion, particularly in categories like electronics, furniture and sports equipment where ticket size varies enormously from one customer to the next.

 

There’s a loyalty angle too, and it’s the more durable one. Shoppers remember when a retailer offered them the right tool for the purchase they were actually trying to make, rather than pushing every transaction through the same generic financing option regardless of size or fit. Get that matching right consistently, and it becomes a real driver of repeat purchase: customers return to merchants who made a big purchase feel manageable, without making them feel oversold on credit they didn’t need in the first place.

 

 

A maturing market

The instalments space is also entering a more regulated, more scrutinised phase, with UK oversight extending further into short-term consumer credit than it has before. That’s a healthy development for the category as a whole. Clearer disclosure and firmer affordability standards raise trust in instalment payments generally, and that benefits every model operating responsibly within it. For merchants, that means shoppers arriving at checkout better informed and more confident in the options in front of them; for shoppers, it means clearer terms and real recourse if something goes wrong, whichever way they choose to pay.

 

The takeaway for merchants is simple: instead of asking whether to offer BNPL or card-linked instalments, start asking which of your baskets each one is actually built for. The retailers getting the most out of instalment payments right now aren’t the ones backing a single provider. They’re the ones building a checkout that has a good answer for both the £70 shopper and the £1,500 one. 

 

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Alex Forsyth-Thompson is Founder and CEO of Float, a card-linked instalment platform that lets merchants offer shoppers the ability to split any credit card purchase in up to 12 interest- and fee-free monthly instalments, using the credit they already have on their existing Visa or Mastercard

 

Main image courtesy of iStockPhoto.com and FreshSplash