Pay In Installments, Split Payments and Pay Overtime Functionality for E-Commerce

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Thanks to the COVID-19 pandemic, eCommerce business owners are getting requests to handle customers splitting payments, using an installment plan, or paying over time. These systems include BigCommerce, Shopify, Volusion, and 3DCart.

Over the past month, we’ve received around twenty requests from eCommerce websites trying to install pay over time, pay with multiple cards or split payments kind of functionalities, and the reason that this is happening is obviously that the consumer is suffering.

Letting Your eCommerce Customers Shop Now and Pay Later

Payment plans and installments are not new. Brick and mortar stores have used them for people who cannot afford a six-hundred-dollar barbecue grill or an eight-hundred-dollar engagement ring in one purchase. They might not have the money right now but want the product. As a result, they divide the cost into monthly payments that they can budget more easily.

The same principles can apply to eCommerce, which benefits both the buyer and the seller. You as an eCommerce business owner can adapt to these economic times and increase your conversions. The solution is providing some of these functionalities for your users rather than manually responding to every split payment request.

Our firm has anticipated this demand. We first completed a payment functionality with a firearm dealer five years ago and can repeat the process. The client wanted a layaway functionality and split payments into multiple cards. Our team was able to deliver on that.

Other than for the economic reasons, why do you think the requests for these have increased during the past 30 days?

Everyone knows we’re going to enter a recession thanks to the pandemic. Consumers are stuck between a rock and a hard place: necessities and commodities. Emotionally, some items considered unnecessary may improve their wellbeing but they’ll have to forgo them without a paycheck during layoffs and furloughs.

An eCommerce store can give them the ability to split payments or allow for installments on unnecessary and necessary items. The functionality captures the customer and converts them into a buyer.

Increasing Sales For eCommerce by Offering Consumer Financing

Another relationship has changed; eCommerce stores must accommodate the consumer now. Before, the eCommerce brand held all the power. Now the gears have shifted to give the consumer control over the buying process.

Let’s consider one industry implementing this functionality: cruise lines. By law, they cannot have ships transporting tourists as they were before because it creates a moral hazard with the virus. Three cruise lines control more than 80% of the industry, and they need to find another way to sell their wares.

Carnival Cruise Lines has succeeded, as their bookings were up 600%; this is interesting since people cannot travel on cruises. Yet they have customers planning trips. We browsed their website and checkout options. Shockingly enough, Carnival now has “pay over time,” which they did not have before. This allows customers to pay in installments and split into cards.

“Pay over time” is a layaway solution combined with an affirm functionality. This is related to your credit check. You pay over time with no interest or a minimal amount. There are tools that you can integrate and all these solutions use API so they can be implemented.

Split payments involve multiple credit or debit cards. A consumer has different reasons for making this choice. You might not have enough credit on one credit card or line of credit. Or maybe you’re buying it as a group. Religious and nonprofit organizations like split payments because they want to split it into different types of cards.

These are the types of functionalities that we’re seeing. Over the next two years, we will see more and more requests from eCommerce customers asking to be able to pay in multiple installments or split credit cards and payments.

Platforms also vary at the checkout stage for customers. This is pretty straightforward for hosted carts, like Volusion, 3dcart, Miva, Shopify, and BigCommerce. The same goes for open-source platforms like Magento and WooCommerce.

With enterprise, however, payment gets complicated. What are your criteria for the method of payments and margins? Is there an average order volume?

Look at your average price point and then your average order value. If you’re within the 500 plus range in your average order value, then consider customized payment functionality.

People may be able to still stomach a $300 or $400 payment. If your average order value is over 500, however, you need to look at either a layaway solution, split payment, or any type of installment payment.

How Offering Installment Payments Increases Conversions and Decreases Abandoned Carts

What kind of conversion increases have you seen with this level of functionality before for the right eCommerce client?

There is sometimes a jump of five to sometimes even a ten percent increase in conversion rates. This could truly help your conversion rates. Tracking conversions will become a little different. From that initial checkout where that individual doesn’t necessarily have that item yet, doesn’t have that product yet, nor have they fully completed that payment, so tracking conversions are going to be a little bit different, but at least the initial checkout conversion rate will increase.

How do we actually make it possible? Shopify, BigCommerce, Volusion, and Magento don’t come with this functionality built-in.

We alter the checkout accordingly; if we have to use an alternate payment method, we split your checkout and take a percentage of a sale in the checkout process. In addition, we also create the checkout “Thank You” page that actually makes this functionality possible and implement a third-party database that tracks on a per-product and per order basis, what was paid and what is owed.

Consider this scenario. A customer visits your site and wants to purchase a $1,500 product. The minimum you require for a deposit is $500. When they want to purchase that product, we charge this card $500 and then they owe you $1,000. They have the option to split that into three payments or pay the full price at their convenience.

We track that on a third-party database and reflect it through API to your platform. It’s a workaround, but it’s a very straightforward process. We’ve done that multiple times. Maintain an inventory management system; they log when an item gets checked out, or they initiate the checkout that that item now becomes on hold. Without having that proper tracking in place, you can get into overselling or encounter other issues.

If you are tracking quantities, you’re going to need to work on that logic of holding the product. Try not to oversell, or you will get negative reviews.

What industries should you watch?

Keep an eye on home improvement. These include home appliances, flooring, paint, tools to assist with everyday chores, or handymen. With the pandemic, these will become necessities.

Firearm sales have increased tremendously. Some consumers consider them necessary, so we’ll see a huge increase in the number of layaway solutions within the firearm industry.

Other industries have surprised us, and still, more will thrive in the middle of the crisis. Our firm is watching them for potential demand for layaway solutions.

Two surprise successes have been furniture and gym equipment because people cannot gather in groups or attend a class. Consider stationary bikes, weights, elliptical machines, and other equipment that people cannot access now in public places. Providing them at home fulfills a current need. If your average order volume exceeds $500 USD for gym equipment or furniture, then you need that functionality.

If you have any questions, let us know. We’ve built these types of functionalities dozens of times for our clients. Our team will be happy to guide you in the right direction for proper payment installments.

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