Here’s a tip: If you want to get customers on board, offer them a perk – something special that they can’t get anywhere else. And if that perk helps them save time or, especially, money, then you have a good chance of winning a sale and a loyal customer.

Some perks work better than others. Customers like the idea of free or flat-rate shipping, for example. Amazon Prime does this right with the company’s policy of shipping anything, large or small, for a flat annual fee, a winner with many customers.

For many e-retailers, though, free shipping is an expensive proposition – and as it turns out, it’s not even the most effective perk. Fifty four percent of consumers in a poll conducted on behalf of Splitit said that interest-free installment payments on purchases would be more of an incentive for them to buy from a site than free shipping; more than half, in fact, said they would be more enticed to buy from a site that offered installment payments as a perk than if they got a 10% discount.

E-retailers not familiar with the concept of interest-free installment payments can be forgiven for their lack of knowledge; it’s not a concept well-known in the US just yet. But installment payments are a big item in several countries, including Turkey, Argentina, Brazil, Israel and others.

Splitit Payment Installment history

In an installment scenario, a customer uses their credit card to make a purchase, but instead of crediting the purchase to the card immediately – making that purchase “eligible” for revolving-credit interest charges, in the case of the latter – the bill is split up into a specific number of monthly payments, no interest needed. Thus, if a checkout bill is $400 and the customer chooses to pay off the bill in ten payments, their card will be charged $40 a month until the bill is paid off.

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The advantage of this for customers is that it provides them with a way to keep their finances under control. Even consumers who pay off their credit card balance every month get flustered when they look at their statement, and do some mental juggling on how they are going to pay everything off that month. Interest-free payments provide built-in “discipline” for consumers who want to better control their finances but find it hard to do so on their own.

splitit payment installments market opportunity

Interest-free payments provide perks for e-retailers, as well – in the form of bigger sales. According to the survey, 40% of high-income e-commerce customers ($100-150K + annual salary) – the kind most sites seek to attract – said they would increase the size of their purchase by at least 10% if offered interest-free credit-card based installment payments.

Splitit Payment Installments High income

It should be noted that interest-free payments are different than layaways, where customers pay the full amount owed into a store account before getting their items. In an interest-free payments scenario, the items are shipped right away, while they commit to paying off in the allotted period (the payment is guaranteed by the fact that the customer used a credit card to make the purchase). The primary reasons cited for the preference of installments for all consumers is for budgeting purposes (54%), affordability (40%), building credit (4%) and zero interest (2%).

Another big reason to accept interest-free payments is to connect with what will soon be the nation’s largest consumer groups – Millennials, whom the survey shows are currently the second biggest credit card user group (37%), behind people 65+ (42%) – and they are the most likely to say that they would buy more if offered the option of payment installments.

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splitit reasons for payment installments

Nowadays, consumers feel squeezed; incomes are down and expenses are up, and even those who feel “secure” are being more careful with their expenditures. That means they are less likely to buy the things they need and want, preferring to make do with less.

It doesn’t have to be that way, though; with interest-free payments, consumers feel more confident in spending, and are more willing to open their wallets. For e-retailers, that’s enough of a reason to give interest-free installment payments a shot.

How ready are you to offer installment plans? Tell us below or tweet us!

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