The events of 2020 have upended nearly every industry, particularly retail. Widespread shutdowns shuttered brick and mortar stores for months at a time, while online shopping grew by more than 30% from March to April, alone(eCommerce retailers).
Read More: GlobalFintechSeries Interview with Chuck Klein, Chief Executive Officer & Founder at IMM
This increase doesn’t mean eCommerce merchants should rest on their laurels, though. As the uncertainty around the economy continues, consumers are increasingly scrutinizing their purchases and looking for greater flexibility.
One way retailers can offer that flexibility while battling cart abandonment and boosting brand loyalty is through installment payment options—an industry valued at $1.9 trillion that continues to grow in popularity. By the end of next year, 1 in 3 eCommerce retailers plans to offer buy now pay later options—and for good reasons.
Here are the top four benefits for merchants who offer installment payment options:
Improve the shopping experience
“Cash or charge?” is no longer sufficient. Retailers have to adjust to the evolving demands of consumers who increasingly embrace contactless payments, digital wallets, and credit agreements that offer the benefits without the fees. It’s all about choice.
Buy-now-pay-later is a term used to describe any payment plan, but not all options offer the same benefits. Companies such as Affirm and Klarna offer new zero-interest credit at the point of sale, while Splitit works within a customer’s existing credit line to offer interest-free monthly payments. Merchants can provide maximum flexibility for their consumers by offering multiple installment payment choices just as they would accept Mastercard, Visa, and AmEx.
Reduce cart abandonment
With online cart abandonment reaching 68.3%, companies have to take steps to make the buying process easier for consumers. Amazon’s one-button revolution has shown the power of a simplified checkout process, but a sleek website optimized for mobile transactions isn’t enough.
Installment payments can lead savvy consumers to make favorable calculated decisions on affordability at the point of sale. For many consumers, spending $500 today on a new bicycle or mattress may be impossible. But, if they are able to break up those payments into $100 over the next five months, the cost barrier isn’t as prohibitive.
Retailers must always remember the one-button lesson, though. Some BNPL solutions actually add friction to the payment process, requiring a credit check at the point of checkout. Using an installment option that works within a customer’s existing credit not only offers an affordable installment option, it also allows for a streamlined purchasing process.
Make larger sales
Upgrading to a more durable mattress, appliance, or piece of furniture may not be possible for many shoppers—particularly in an environment of widespread economic uncertainty. But when the upgrade represents $20 or $50 per month, without the fear of accruing interest, consumers suddenly possess more buying power.
And with 55% of shoppers reporting they are more likely to buy or spend more if they had the ability to pay in installments, retailers can open up an entirely new line of products that still fit within a consumer’s budget.
Build brand loyalty
Making the sale is important. Enabling larger, responsible purchases is even better. But, lifetime customer value (LCV) is the most crucial metric every CMO seeks to grow. And LCV comes down to brand loyalty.
Retailers won’t get very far in today’s market trying to upsell customers who can’t afford their products. Installment payment options allow retailers and customers to align across their financial values like adhering to a budget, avoiding debt, and increasing their purchasing power. With the right solution, they’re also helping customers build a positive credit history while earning rewards from the credit card provider.
Read More: Pitfalls To Go Through While Choosing A New Payment Processor
