It’s no secret that more people are shopping online. The pandemic has accelerated this trend, which is projected to reach an astounding $709 billion by the end of the year. But as shoppers become increasingly comfortable with online shopping, they are also growing more concerned about their financial situation as the pandemic rages on. A recent global survey found that nearly half of U.S. consumers see their personal finances as “not so good” or “poor,” up 20 percentage points from July. As a result, today’s shoppers are seeking flexible and responsible ways to pay when they shop, especially when it comes to luxury items. Enter installment payments, one of the fast growing payment options in the U.S, and a surefire way to help consumers make luxury fashion and jewelry purchases, while picking a payment method that’s right for them.
Why Installment Payments?
Installment payment plans, aren’t a new concept, but the flavor of today’s installment plans are quite different. Instead of waiting to take a purchase home like shoppers did with layaway plans, today’s installment plans, also known as buy now pay later (BNPL), provide shoppers and retailers with a new way to pay that provides immediate gratification.
Although most shoppers have credit cards, the flexibility of typical card-based credit does not always deliver the full range of flexibility that shoppers are seeking. For those shoppers who don’t have a high enough spending limit or enough credit available to make a high-ticket purchase, BNPL offers the ability to budget for more expensive purchases and a designated period of payments that works best for their budget.
For retailers, BNPL provides a wide range of benefits, including reduced cart abandonment. On average, around two-thirds of shopping carts are abandoned, which equals a lot of lost sales for most e-commerce brands. Brands that add BNPL options at the checkout are seeing a sharp drop in cart abandonment rates, leading to a boost in profits without any significant cost increases. In addition, BNPL offers merchants higher average-order-value and helps increase customer loyalty by creating a positive shopping experience.
What Do Shoppers Look For In A BNPL Option?
Just as retail brands compete for customer attention, spending and loyalty, so do the increasing number of BNPL brands– Affirm, Afterpay, Klarna, and Splitit, to name a few. As the BNPL space continues to expand, shoppers are left to decide which installment payment plan best meets their needs. In many cases, these decisions boil down to simplicity, trustworthiness and quality of the overall shopping experience.
Simplicity: Creating friction during the checkout process is the surest way to frustrate and turn away customers. A recent Splitit survey found that 87% of online shoppers will abandon their carts during the checkout process if the process is too complicated, and 55% of all online shoppers would actually never return to site. In addition, with shoppers reluctant to overextend themselves, interest-free monthly installment payments become much more attractive. In fact, 35% of shoppers are more likely to make a purchase if they are offered the ability to pay in interest-free installment payments.
Trustworthiness: Shoppers prefer payment methods that they deem to have the highest level of security, especially as concerns over data security and privacy are rising. While some shoppers do actively seek out new lines of credit, many may be uncomfortable sharing the additional data required to obtain credit approval. As a result, installment or pay-later options must be offered to shoppers with a maximum of reassurance.
Positive shopping experience: Today’s shoppers are looking to enjoy their shopping experience from start to finish. When it comes time to pay, late fees, penalties, and interest rates can create a negative experience. Shoppers may even blame retailers for putting them in that situation in the first place. As a result, shoppers will look for options that cost them nothing in terms of additional APRs or fee structures.
The Splitit Advantage
While there are many BNPL options to choose from, Splitit gives shoppers a way to pay for purchases with an existing debit or credit card by splitting the cost into interest and fee free monthly payments, without additional registrations or applications. Customers get to choose their total timeframe, how often they want to pay, and how much they want to pay in each installment.
Splitit helps meet customer demand for a smooth, hassle-free checkout process. Studies show the more clicks someone has to make, the more likely they are to move on to another site. By working with a consumer’s existing credit, Splitit eliminates the extra step shoppers must take when using an installment payment option and keeps shoppers on the retailer’s screen.
Splitit works best with higher value purchases such as mattresses, furniture, fine jewelry, and other luxury items. It allows shoppers to make their dollars reach farther by having more time to pay for purchases that will last for many years to come. Since Splitit works with shoppers’ available credit, it’s a safe way to stick with a budget and still enjoy purchases without overextending themselves.
Luxury brand fashionette, which curates designer handbags, shoes, and accessories, experienced over 20% higher order values when they added Splitit to their e-commerce site. With no interest, late fees, or penalties to pay, Splitit helped shoppers make the right choice for their style and their budget and a more seamless check-out process for fashionette.
For those brands that do want to also offer consumer financing to shoppers, Splitit is often available as a complementary option, so shoppers can choose the payment method that’s right for them.
As today’s savvy shoppers continue to balance economic uncertainty with the desire to shop online, they are looking for maximum flexibility with payment. The beauty of BNPL is that shoppers don’t have to delay purchasing the things they really want, especially with big ticket items filling up holiday shopping lists. With options like Splitit, shoppers can enjoy bigger purchases right away while still managing their budget responsibly. In this way, shoppers can have their proverbial cake…and eat it too.