With the Covid-19 pandemic, the trend towards alternative payment methods has accelerated. Instalment payments like Buy Now Pay Later (BNPL) have seen an astonishing rise in popularity in recent years due to their flexibility and convenience for customers worldwide.
According to Statista, the global buy now, pay later market will reach 450 billion USD by 2026. BNPL is now the fifth most popular e-commerce payment method in the UK, ahead of pre-paid cards and direct debits. About 26.4 million British adults had used BNPL services at some point as of 2024, up from 36% at the start of 2023.
Instalment payments represent a shift in consumer purchasing, offering a way to pay in instalments that align with individual budgeting and cash flow. This financial mechanism allows individuals to make large purchases more manageable and accessible by breaking down the payment into smaller, more digestible chunks.
What is an instalment payment?
An instalment payment is a financial arrangement where a total purchase amount is divided into smaller, regular payments spread over a set period.
Customers can opt for monthly or quarterly instalment payments instead of bearing the financial burden of paying the entire amount upfront.
This payment method is beneficial for both consumers and businesses. Consumers enjoy increased affordability, better budgeting control, and access to larger or more premium purchases. Instalment payments offer a savvy approach to managing their finances, allowing them to maintain their cash reserves while still making essential purchases.
Instalments also empower consumers to attain items that would be out of reach if a lump sum payment were required, with the option to spread the cost over a period depending on their financial landscape.
On the other hand, businesses, whether retail or hospitality, benefit from more sales and a more regular cash flow. Instalment payment plans significantly enhance their customer retention strategies. By allowing customers to pay in instalments, businesses benefit from an increased average order value, as customers are more inclined to make larger purchases when they can pay in smaller, more manageable amounts.
This payment flexibility can also reduce returns, as customers are less likely to experience buyer’s remorse when the financial impact of their purchase is spread out over time.
Furthermore, the convenience and affordability of instalment payments encourage customers to return, fostering brand loyalty and repeat business.
Moreover, offering instalment payments means businesses can avoid the hassle and expense of chasing unpaid invoices. These plans typically ensure that the business receives payment upfront, even though the customer pays over time. This improves cash flow and reduces the administrative burden associated with collections, making instalment payments an attractive option for both businesses and consumers.
Types of instalment payments
Instalment payments come in various forms, each tailored to meet a specific need:
Equal instalment
The total cost is divided equally into fixed monthly payments. Many who seek a consistent payment schedule favour this predictable and straightforward option.
Unequal instalments
This type involves varying payment amounts throughout the term. It can be particularly useful for seasonal purchases or individuals whose income fluctuates, allowing them to budget around specific income cycles.
Balloon payments
Balloon payments are characterised by smaller regular payments followed by a larger final payment. This type is suitable for those facing short-term cash flow challenges. It enables the acquisition of expensive purchases without the immediate financial strain.
Examples of instalment payments
Here are the two most common examples of how instalment payments are used in today’s market:
Trust Payments subscription engine
Users can schedule payments to be processed at regular intervals on their behalf by utilising our Subscription Engine. The Subscription Engine is activated once per day, automatically processing any payments previously scheduled on your account.
You can read more on the Subscription Engine here.
PayPal pay in 3
This service exemplifies the equal instalments model. It allows users to split purchases ranging from £30 to £2000 into three interest-free payments over two months. For instance, a £300 item can be divided into three payments: an initial £100 at the time of purchase, followed by two subsequent £100 payments.
Instalments enabled by Visa.
Visa allows credit and debit cardholders to divide their purchases into smaller, equal, and typically monthly instalments. Various payment plans, such as pay in 12 or pay in 3, offer flexibility and choice.
Trust Payments offers merchants acquiring accounts that allow them to offer consumers instalment payment options, enhancing their access to goods and services. These accounts allow merchants to offer their customers a more convenient way to pay for their purchases while reducing upfront costs.
Trust Payments also provides merchants with a comprehensive suite of payment services, such as fraud prevention and payment analytics.
Incorporate instalment payments today
Instalment payments offer a strategic approach to managing finances, allowing for better cash flow management and making high-value purchases more attainable.
Merchants can take advantage of the many benefits of this payment option while supporting all types of instalment payments with Trust Payments.
Both consumers and businesses aiming to thrive in today’s fast-paced financial world must use instalment payments as a strategic imperative.
Ready to boost your sales and enhance customer satisfaction with instalment payments? Contact us today and start offering your customers the flexibility they need. Embrace the future of transactions and watch your business grow!
