Installment Payments: How Retailers Can Help Consumers This Holiday Season

With the 2023 holiday season upon us, the predictions for how the season will shape up are a bit of a mixed bag. Adobe predicts online shopping will increase by almost 5 percent between Nov. 1 and Dec. 31. Yet other indicators have signaled a decline in consumer confidence. The reality of the new economy is that it's impacting consumers harder than expected, and clearly with no end in sight.

Keeping that in mind, growth-focused retailers will need to find new solutions to help consumers facilitate purchases during this challenging time. Even affluent households are less optimistic today. A recent McKinsey report noted that high-income consumers were responsible for the largest decline in optimism compared to other groups. And among age demographic lines, millennials’ optimism declined 34 percent between April and August.

Installment payments are one of the most effective ways that retailers can promote sales growth by helping the consumer to better manage their spending. White-label installment platforms empower merchants to allow seamless, in lane, fast installments without bouncing their shoppers to another website or making them take out additional credit which can add friction to the checkout process. Fiscally responsible solutions that use the shopper’s own, existing and untapped credit offer consumers easy ways for them to buy now but pay later.

Using a consumer’s existing bank-issued credit card for deferred payment options is quickly becoming broadly more appealing among shoppers from diverse backgrounds. A new study, Installment Plans Becoming a Key Part of Shoppers’ Toolkit, challenges widely held assumptions about credit card usage and income levels. It found that 64 percent of consumers earning more than $100,000 annually favor installment plans, and that high-earning millennial shoppers are the consumers most likely to use a credit card-based installment plan.

In fact, 60 percent of all shoppers used some type of installment payment option over the past 12 months, and even older consumers used them to pay for consumer goods in that same time period. Sixty-two percent of Generation X and 46 percent of “installment-averse” baby boomers and seniors used them. Clearly, there's a dramatic change underway in consumer spending habits accompanied by a new-found appetite for flexible payment solutions that retailers would be wise to embrace.

Current economic conditions are also making credit harder to get, and retailers are feeling the effects of a tightening credit market. Because legacy BNPL programs are declining higher value and more risky purchases, retailers have seen lower conversion and higher abandoned cart rates. However, shoppers with access to interest-free installments linked to their existing credit cards will consider spending more, especially if the installment options are promoted upfront on the product page. Merchants using card-attached installments have seen, on average, a 24 percent to 28 percent increase in cart values, coupled with an 88 percent authorization and approval rate, and an approximate 20 percent decrease in abandoned carts.

Forward-thinking merchants are utilizing embedded finance solutions to empower their business to drive growth despite the challenging times. White-label installment options not only give shoppers greater flexibility to manage their purchases effectively and conveniently, but also drive sales and higher conversion rates, while building trust and loyalty for the long term. These solutions allow retailers to retain their customers without a third party creating friction and hesitation during the checkout process, invoking redirects and requests for obtaining proprietary customer data, and then heavily remarketing to those shoppers. By eliminating friction and providing more effective embedded finance solutions, like card-attached installments, retailers can certainly help to make the holiday shopping season much brighter for themselves and their customers.

Colin Mellon is chief commercial and growth officer at Splitit, a card-attached installments company that uses a consumers’ own existing, untapped credit.