Splitit, a Buy Now, Pay Later cash management tool for premium products and services that enables consumers to spend smarter by making the most of the credit they’ve already earned, saw average value of Orders have increased since the holiday countdown began with Black Friday, with increases of around 60%.
“After Black Friday and Cyber Monday, we released the first two months of our fourth quarter, which was October and November,” said John Harper, interim CEO of Splitit. “In just two months we have already passed our record quarter, so in two months we have passed any three month period in our company’s history. We are currently on a very good trendline.
Splitit works differently from traditional Buy Now, Pay Later models such as Afterpay and Klarna, among others. Afterpay, for example, allows customers to buy products immediately and pay for their purchases in four installments, always without interest, however late fees may apply. The service is free for customers who pay on time.
Klarna, a global leader in retail banking, payment and purchasing services, offers a range of payment services, including its Pay in 4 or Pay in 30 interest-free solutions. The company will soon introduce the Klarna card to the US market, bringing the Klarna service to a physical card format.
Splitit allows consumers to dip into their unused credit card limits. They pay no interest on the purchase of Splitit, which can be split into 12 equal installments, as long as they pay their credit card bill on time each month. Splitit claims to be the only credit card based installment offer.
“The way our process works is that we put your credit card on hold for the purchase you make,” Harper said. “If you buy a $ 5,000 ring, we’ll put your credit card on hold like a hotel would. For each month that you repay the $ 5,000 in 10 installments, we reduce the withholding by 1/10 and apply that payment.
The benefit to consumers is that they keep airline miles and loyalty program points from the credit card companies they subscribe to. However, installment payment services like Klarna offer their own loyalty programs.
Harper said that Splitit’s model is a more responsible way to buy because consumers are actually using spending limits for which they’ve already been approved, so there’s no additional debt that goes wrong. has not been approved. The cash management tool is based on the past income and purchasing power of customers.
“Because we use credit cards, we are already regulated by all the regulations that apply to the credit card industry. It’s when you get loans from POS that they’re really unregulated, ”Harper said. “These loans are really the part that encourages people to spend beyond their means.”
However, a spokesperson for Klarna said, “Klarna assesses customers’ eligibility for each transaction to ensure they can reimburse us, so Klarna usage is not guaranteed. This is quite the opposite of credit card companies whose most profitable customers are those who pay only the minimum payment each month and charge fees for late payments.
“Klarna makes money by charging retailers, not buyers,” the spokesperson added. “We don’t charge consumers interest or fees, unlike credit cards, which take advantage of late and missed payments. Our business depends on people paying us back.
Klarna’s spokeswoman said her products are designed to take people out of debt with structured repayment plans. “Our business model is that people pay us back, so our incentive is to only lend to those who can afford it, which is why we have strong eligibility assessments including a soft credit check.” , she added. “If people’s circumstances change, we have processes in place to help them and we limit our services after missed payments to prevent debt from building up. “
Nationally, about 80% of credit card limits go unused, said Harper, a 15-year veteran of Macy’s Inc.
The Buy Now, Pay Later plans have become extremely popular with Millennials, who choose to defer payments because they may not yet have credit cards, while Splitit is aimed at seniors. “Our client tends to be older, a bit richer, and tends to have a credit limit,” Harper said. “For this reason, our average order value is around $ 1,000, which is definitely four times the size of most of our competition.”
Afterpay said their average order value is $ 150. Klarna’s average order value is between $ 140 and $ 150. The company said retailers typically see their average order value increase by 20 to 80 percent when consumers use Klarna.
Average orders have trended upward, Harper said, depending on the industry. “We are very popular in the jewelry industry, and our average order value has increased dramatically over the past two years as the jewelry industry really took off during the pandemic,” he said. “We are also seeing this trend in furniture and mattresses, where we are heavily involved, as well as sporting goods, outdoor recreation and bicycles, where we do a lot of business. “
Merchants can benefit from using Splitit because consumers don’t have to leave the retailer’s website to participate in the installment offer, and the service is just one click away. Once an item is purchased, consumers simply choose how many installments they want to use to pay off the balance with the click of a mouse.
“The other great opportunity that we can offer to merchants, and this particularly applies to the luxury merchants that we work with, is that we can offer a white label opportunity that our competitors do not allow. Luxury merchants don’t want different brands on their website. They want everything with their own brand name, ”not the nickname of a Buy Now, Pay Later service, Harper said.
A spokeswoman for Afterpay said, “We are not a loan. It’s kind of the key to who we are. We don’t charge interest and we don’t do credit checks. We also don’t report to the credit bureaus if you miss a payment and never allow you to fall into the revolving debt trap.
Customers who miss a payment with Afterpay have their platform access restricted, but they can come back if they pay the unpaid installment with a late fee of $ 8. Afterpay also charges an upfront fee. “If you buy a pair of jeans for $ 100, you’re paying $ 25 up front,” the spokesperson said. “We actually think the upfront fees are important because they show that you have the ability to pay and that you have skin in the game.”
Less than 1% of Afterpay’s revenue comes from late fees, the vast majority coming from merchant fees, the spokesperson said, adding that the service is free for consumers. “Our merchants are happy to pay us higher rates than they would pay credit card companies because we nurture young, engaged consumers who become loyal customers. That is why they are willing to pay between 4% and 6%. It’s a different model. In fact, we make more money if you stay on the platform.