• Andrew Harper

Choose the Right BNPL Method: Split Payments vs. POS Lending


The “buy now pay later”’ (BNPL) service became one of the most popular among shoppers and retail business players because of its ability to keep a customer-centric approach. Following Research&Markets prediction, the global BNPL market will grow up to a shocking $656.34 billion by 2026.

Why not? Merchants aim to achieve stable goods turnover, while buyers dream of purchasing everything they want no matter how much money they have in their wallets. The BNPL option seems a win-win for both parties.

But if you want to implement “buy now pay later” in your business, get ready to make a choice. Companies usually apply split payments and POS lending. My goal today is to give in to these options, showing the core difference between them. Read on to discover more.


Split Payments in the Plain Language

What is a Split Payment?

Split Payment is a BNPL method where customers can split their credit/debit card payments into equal parts and pay for purchases regularly without interest.

How Does It Work?

This process involves three parties: a retailer, a buyer, and a bank. The retailer offers the buyer to use a split payment option dividing the total amount into 3 or 4 bytes. The first payment is withdrawn at the moment of purchase. Then, the buyer will pay for an item once per week, month, or quarter depending on the terms.

Meanwhile, the bank covers the total purchase amount and instantly provides the retailer with the money. The bank and the retailer work based on Claim Assignment Agreement. This way, the bank replaces the retailer by receiving the role of a leading “creditor”.

Split Payment looks like a loan, but it's not. It's just a payment product.

Who Does Use It?

Split payments are suitable for small-ticket items. Millennials and Gen Zers preferably use them because of their endless desire to consume more, the comparatively small amount, short-term payment burden, and the absence of interest.


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POS Lending: General View

What is POS landing?

POS lending is an option providing buyers with the ability to pay for a purchased item within a long term with slight interest. It's provided directly via POS software inside a brick-and-mortar store.

How Does It work?

You probably saw a loan point walking on the car distributor branch. A smiley agent is ready to provide you with a loan here and now. So it's just enough to sign documents, and the car is yours. No banks. Everything occurs on-site.

Most likely, you will not pay interest taking a short-term loan, but in case of long-time relations, get ready to spend some more money.

This option is more suitable for bigger-ticket items. The payment withdraws once per 6 or 12 months.

Who Does Use It?

POS lending is commonly used by 25+-year-old people wishing to purchase more expensive things, like the above car or a house. They are ready for reasonable interest and sacrifice it to manage financial resources properly.


You may also like: Cashierless Stores Refuse POS Software: Truth or Trick


The distinction between Split Payments and POS Lending

The main question here is “A loan or not a loan?”' Because a core difference between split payments and POS lending is that split payment is not a loan; meanwhile, POS lending is.

In case of split payment option usage:

  • No underwriting is needed because the payments are drawn from the existing credit line

  • Know Your Customer procedure isn't required since a card issuer has already performed it

  • Banks receive a payment guarantee because of withdrawing 25% from the total amount instantly after the purchase

For retailers, there's no difference in what BNPL method to use because they are safe in both cases (the total amount of purchase is covered instantly). However, they should consider customer preferences and audience segmentation.

Split Payment

POS Lending

Place

Online/offline

Only Offline

Interest

No

​Yes

Purchase

Small

Large

Loan

No

Yes

Credit/debit card required

Yes

No

Payment frequency

week, month, quarter

6 months, 12 months

Mostly used by

18-24-year old people

25+-year old people

Provided by

grocery, clothing stores, etc.

car dealers,

electronics stores, etc.

Wrap Up

So, what “buy now pay later” method to choose from, split payments or POS lending. To be honest, there’s no correct answer since it depends on your business. It doesn’t make sense to provide POS lending for bread and milk if you are a grocery retailer. If you’re oriented towards a young audience, remember that it isn’t used to pay loans or feel a huge financial burden. The same concerns split payments for older people wishing to buy a car. It’s more convenient for them to pay for it within a year, not during one quarter.

Therefore, to make up your mind, you should learn your business conditions and your audience’s preferences. And sure, discover as much as possible about these methods to choose the most appropriate one for your company.


If you need to set up a BNPL feature but don’t know for sure what software will ensure smooth work - let us know. Our team will give you a deep understanding of the processes and products you might need.

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