Installment payment solutions are becoming increasingly common in retail and e-commerce. If you own a retail or e-commerce business and are considering adding this option to your payment offer, you’ll want to know how this step can benefit you.

Installment payment solutions: A rapidly growing option for retail and e-commerce

Installment or buy-now-pay-later solutions like FLOA Pay are becoming increasingly popular in retail and e-commerce.

Not only have merchants adopted point of sale financing en masse; these payment solutions are increasingly being used by consumers too.

In e-commerce, these solutions are increasingly being offered alongside other popular financing options, such as credit cards. In some markets, like the UK, these payment solutions are even more popular than other established methods, such as direct debit or prepaid cards.

How do installment payments work?

These solutions are designed to be integrated with the most common merchant and e-commerce platforms. In most cases, after purchasing the software, you can enable installment payments easily by changing the settings on your admin dashboard.

Once this option is set up, buyers who get to the checkout stage will be able to spread the cost of their purchase over a specified period of time. In addition, shoppers may be asked to make a one-off initial payment.

After the transaction is accepted, the remaining payments are automatically collected and sent to the merchant or seller using the details provided by the customer.

Five reasons to use installment payments

1. Reduced costs

In some markets, merchants are charged rather steep fees for taking credit card payments. As of 2022, these fees amount to 1.3%-3.5% of each transaction. There may also be additional charges involved, including assessment, payment processing, or interchange fees.

On the other hand, installment payment solutions are generally more cost-effective. However, some platforms carry steep fees too, so it’s important to do your research and shop around.

2. Better conversion rates

Low conversion rates have a direct impact on business ROI, so tools that help boost conversions are worth considering.

Installment payment solutions can help tip shoppers towards conversion, as they give them the option to get their hands on an item that they wouldn’t have been able to purchase otherwise.

Thanks to their convenience, installment payment options can lead to conversion rate increases of 20% to 30%.

3. Attract a wider range of customers

Installment payment solutions are especially popular among Millennials and Gen Z consumers, whose purchasing power is not to be dismissed.

Moreover, these solutions can also appeal to younger generations, who may not have access or interest in getting a credit card.

Offering interest-free installment payments makes it easier for this demographic to purchase items or services. This allows merchants to expand their potential customer base by offering convenient solutions that customers are familiar with.

4. Reduced financial risk

When offering financing options, there’s always a risk that the customer will default on payment. With traditional payment options, such as credit cards, merchants would have to assume the losses, whereas the installment payment service provider assumes the risk of non-payment.

5. Better returns in the long-term

Successful shops depend on repeat business, which can be enabled by offering a convenient and personalized payment solution.

Installment payments help deliver a better customer experience, flexibility and personalization, which gives shoppers solid reasons to become repeat customers.

And with increased customer loyalty, merchants can achieve better customer lifetime value and higher long-term returns.

Conclusion

Providing installment payments can lead to better sales figures, increased customer loyalty, and at the same time help reduce costs and financial risk. If you run an e-commerce or retail business, this payment option can be a worthwhile investment.