24 May 2022
Being able to pay in instalments makes it easier to spend large sums. With 2, 3, 4 or more monthly instalments, this service, often with no visible cost to the consumer, has become a popular marketing advantage for e-commerce. According to a Kantar study in 2021, 37% of French people have already used this multi-payment option, and it’s still rising. If you’re a B2C marketplace, missing out on this payment feature could mean losing customers and significant sales opportunities. Here’s why?
First, instalment payment is not consumer credit. The amount is simply spread out over a period of time, and repayment must not exceed 90 days. In addition, the interest rates are often insignificant – or even non-existent for the consumer – unlike credit. But the difference is mainly due to the stricter rules governing consumer credit – where a contractual relationship is created – and consumer protection. Instalment payments provide more flexibility in the purchasing process than consumer credit.
There are many reasons why consumers choose to pay in instalments. For example, there can be unexpected expenses such as house or health costs. While waiting to be refunded by the insurance company or private insurers, users prefer to split their cash outflow into several instalments to avoid overdraft charges for purchases over 500 euros, such as smartphones or household appliances. The expenditure is smoothed out over several months, and the consumer’s budget is balanced.
Marketplaces, what if you thought about split payments to increase your sales? Better yet, use “buy now, pay later” as a selling point to differentiate yourself from your competitors.
The last two years have completely changed consumer habits. Although online sales have exploded with the health crisis, e-commerce now represents only 13% of retail trade, according to FEVAD. Consumers still prefer physical channels, hence the interest in setting up a BNPL in-store.
To differentiate themselves, marketplaces must adapt to the new demands of users, who want simplicity, speed, and fluidity in their online shopping experience. Split payments meet these expectations as they work as quickly as cash payments. In addition, it allows the purchase of more expensive products without affecting the budget balance. A hesitant consumer will be more easily tempted to validate his basket if he can spread out the payment. From the marketplace’s point of view, this increases the conversion rate by bypassing the customer’s temporary cash flow problems. E-commerce sites in the fashion industry have seen increases in the average basket of more than 60% in cross-sell and up-sell. On average, a company’s turnover offering payment in instalments increases by 20%. For 1 in 4 consumers, the payment service has become a criterion for buying from a site. Therefore, it is an excellent tool for acquisition and for building loyalty.
Finally, using a service provider to offer split payments will avoid the disappointment of unpaid bills. In a dispute, the provider will be responsible for recovering the sums. This incident will be painless for the marketplace, as it will have recovered the total amount via the payment service provider (PSP).
Faced with multiple instalments offers, it can be difficult for a marketplace to identify the right partner. While the leading consumer credit providers have had to rethink their model, new players have entered the market to compete with them.
One of the first criteria for choosing a solution is the cost of paying in instalments. Consumers tend not to incur additional costs for using this method. However, the marketplaces pay for this, between 1.45% and 2.2% depending on the provider.
Another criterion is the acceptance rate of the provider. Some have implemented incremental risk management according to the “quality” of the consumer. A buyer with no risk will only have to enter his credit card details to benefit from the split payment. In contrast, another considered more at risk will be offered an adapted course, in real-time, with a verification of his identity document.
It is also essential to look at whether the provider can meet your current needs in terms of diversity of splitting and whether it will be able to extend its offer (deferred payment, multiple monthly payments to more than 4, etc.). The technological innovation of the solution is an asset to guide the choice. The use of customer data coupled with artificial intelligence should enable specific solutions to stand out from the competition.
A final argument for choosing a provider is the ease of integrating the solution. Many partnerships are being created between PSPs and Content Management Systems to simplify the payment process.
It should be noted that B2B marketplaces can also be equipped with a payment system in several instalments. Replacing other payment processes such as factoring or deferred compensation, the BNPL could represent a small revolution and an opportunity four times greater than B2C in a market that already uses credit.
As a pan-European payment service provider, Lemonway handles international payments for marketplaces in 14 currencies. A Lemonway split payment solution is currently under development and will be available before 2022. Our experts are available to discuss this with you today.
Are you convinced that split payments would help you boost your sales? Take advantage of our experts’ advice to maximise your chances of success with your B2C marketplace platform! Contact us now!
