Installment plans have become a preferred payment method for consumers.
PYMNTS Intelligence has found that 60% of shoppers used an installment plan to buy consumer products in the last year. That percentage is even higher among younger shoppers.
The popularity of installment plans is largely driven by consumers’ interest in using this payment method to better manage their spending and to enjoy convenience, according to “Installment Plans Becoming a Key Part of Shopper’s Toolkit,” a PYMNTS and Splitit collaboration.
But what about the other 40% of shoppers — those who have not used an installment plan in the last year? Why don’t they use that payment method?
The No. 1 reason cited by these shoppers is that they did not need to finance purchases. Fifty-seven percent of these consumers said that was a reason for their not using installment plans, and 46% said it was the most important reason, according to the report.
The second most common reason is consumers’ concern that using installment plans will lead to overspending. Thirty-seven percent cited this as an issue, and 24% said it was the most important reason for their not using this payment method.
About 13% of consumers said they pass on installment plans because there are no rewards or deals for using it, while 12% said this payment method is too costly.
Other reasons shoppers cite for not using installment plans over the last 12 months include worries that it could lower their credit score, concerns about data security, applications that were not approved, a lack of trust in providers, a lack of availability and difficulties using the product. Each of these reasons was cited by a single-digit share of the consumers who were surveyed.
There are still some frictions to be ironed out as merchants work to embed installment plans into the transaction flow, Splitit CEO Nandan Sheth told PYMNTS’ Karen Webster in an interview posted on Thursday (Oct. 19).
Ideally, the options should be offered in this midst of the flow, before the purchase occurs, Sheth said.
“It’s the holy grail,” Sheth said, adding that platforms including Splitit help streamline unlocking of installments for clients that include the card network as shoppers keep earning cash rewards as they choose the number of installments and have a measure of control over the post-purchase paybacks.
To harness the trend toward installment plans, merchants should assess and adapt their current offerings, PYMNTS Intelligence found.
Trust, minimal costs and other incentives are more important to shoppers than ever before, according to the report. By fine-tuning their installment offerings to accommodate these priorities, merchants can make the most of installment plans.