No one can predict the ultimate impact COVID-19 will have on global business. Months of entire industries shutting down will have lasting effects on the economy, impacting businesses and consumers alike.
During these uncertain times, businesses in a position to help have a responsibility to do what they can to ease the burden. Particularly in the payment industry, there is an opportunity to help consumers manage their finances without saddling them with long-term debt, empowering them to better control how they spend their money and take ownership of their expenses.
The payments industry is in a unique position to offer consumers and merchants tools and technology to help them navigate this difficult time. Here are a few ways the industry can best support consumers—and by extension—their businesses and the market as a whole.
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Now, more than ever, consumers will need to take control of their spending and revisit the way they budget. In this current environment, it may be harder for consumers to access new credit or may not have income to cover credit card payments, resulting in growing debt.
Some issuers like Citi, Barclays, and others are working to address their customers’ limited cash flow by offering qualified customers the ability to extend their lines of credit. But more credit is not necessarily the answer. If the coronavirus pandemic pushes an economic recession long-term, even those with the most optimal credit scores could find themselves burdened by on-going bills they just can’t pay.
Alternative payment tools like Buy Now, Pay Later can be attractive for consumers, allowing them to pay off purchases in installments but while accruing interest and impacting their credit score. These payment schemes need to be transparent and clear in their fine print, as many are offering short-term loans, adding fees and extra costs that can add to debt.
Instead, look to tools that use existing credit lines. At Splitit, we work with a consumers’ own credit line so there is never any interest, fees or applications. By extending flexibility, consumers have control of how and when they can pay off their purchases – helping them to better budget and control their cash flow by splitting up payments into an installment schedule that works for their unique needs.
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Help Merchants Increase Brand Loyalty
Consumers are not the only ones that will need help to survive the business impact of coronavirus. With physical stores shutting and retail employees in danger of losing their jobs or being furloughed, merchants need tools to make the most of their online traffic to increase sales and conversion and decrease cart abandonment, all in a cost-effective manner.
As consumers grapple with the economy and fear over the virus, spending patterns and priorities are shifting. Merchants must adapt to the changing spending habits and offer options to attract, retain and encourage brand loyalty in this volatile market. For example, our data shows that merchants that offer installments see a 20-30% increase in cart conversion. This is significant in a world where merchants will be significantly reducing marketing spend, making payments an increasingly important tool to help merchants increase sales and revenue.
Installment payments provide shoppers with flexibility and control, boosting a customer’s buying power. And they can also help brands build loyalty and grow their core customer base—helping to offset revenue lost through cart abandonment. Retailers with a reputation for helping customers keep their spending in check and offering greater control over how they pay, offer long-term value beyond free shipping and coupons.
The predictability consumers crave
As an industry, we’re positioned much better at the start of whatever is to come of the coronavirus pandemic than we were in 2008—when every financial institution shouldered some share of the public blame.
Let’s stay on the right side of the struggle, helping to keep our customers as financially stable as possible. By committing to transparency, helping consumers spend responsibly, and collaborating with merchants to ensure optimal customer experiences, we can help ourselves and our customers come out the other side of the coronavirus pandemic stronger than before.
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