Business Tips

Are Installment Payments Right for Your Ecommerce System?

Last updated January 2022

If you embraced ecommerce solutions long before pandemic became a household word, expansion might be your goal. If you’re just starting to get your feet wet — even after having a successful brick and mortar store — questions abound. The question of offering alternative payment options, such as installment payments, is a top concern.

If you are wondering about how installment payments can enhance your ecommerce business, this post will help you answer several questions including:

  • What are installment payments?
  • How do installment payment systems work with ecommerce platforms?
  • Which installment payment solution fits my ecommerce goals?

For more in-depth information, please read these resources: The Merchant’s Guide to “Buy Now Pay Later” Solutions and The New Installment Payment Landscape. For now, let’s dive into these common questions.

What are Installment Payments?

Cash is still king, but in the land of ecommerce, credit holds its own. The way shoppers are able to move and shift money electronically continues to evolve. Installment payment plans are part of that evolution. While the idea of paying over time isn’t a new concept, the flavor of today’s installment plan is wildly different. 

In its basic form, an installment payment plan allows a shopper to:

  • Pay for a fraction of the total cost of an item up front 
  • Receive the item right away
  • Make monthly payments until the balance is paid in full

Also referred to as buy now pay later or BNPL, these payment options are offered by installment payment systems provided by fintech companies like Affirm, Klarna, and Splitit. Depending on the system you choose, your ecommerce shoppers will either finance their purchase or pay on their credit card using their existing credit card limit.

How Do Installment Payment Systems Work with Ecommerce Platforms?

If you’re concerned about how tech-savvy you need to be to set up an installment payment system on your ecommerce store, don’t be. Installment payment providers have done the heavy lifting for you. Many are compatible with major ecommerce systems like Shopify, Magento, Big Commerce, and others.

On your end, you will select your chosen installment payment system through your settings in your ecommerce platform dashboard. To give you an idea of how it works, here is guidance on integrating some top installment payments system providers with Shopify:

The installment payment system and the ecommerce platform are able to talk to each other through the use of an Application Programming Interface (API). When your shopper gets to the checkout, they will see the connected installment payment systems as options (Yes, you can choose more than one).

You’ve done the work to get shoppers to your site, so don’t lose them at checkout by not providing enough payment options. Just as there are some shoppers who will abandon their cart if PayPal is not an option, a growing number of shoppers are expecting (if not demanding) to see an installment payment choice.

Which Installment Payment Solution Fits My Ecommerce Goals?

With so many options available, choosing one installment payment provider over another might seem daunting. The good news is that you can add one or more installment payment options to most major ecommerce platforms and point-of-sale (POS), which is perfect if you also have a brick and mortar store.

The key is knowing what is important to your customers, first. Once you fulfill their needs you’ll want to choose a solution that also benefits your business. 

What Your Customers Need

For a moment, walk in the shoes of your online shopper. They will most likely want a mix of installment payment solutions that:

  • Are easy to navigate and understand
  • Have low to no fees
  • Have a 0% interest rate or a low financing rate
  • Are compatible with browsers, smartphones, and tablets
  • Have transaction limits and payment terms that are agreeable to them
  • Are able to build credit (for shoppers that want this option)
  • Are purely installment plans and don’t require a credit check
  • Have an excellent customer service reputation
  • Are highly rated by verified users

You want your customer to have a positive experience during checkout, but even more so during the life of the installment payment agreement. 

What Your Business Needs

As an ecommerce store owner, you’ll want to choose installment payment solutions that:

  • Have the maximum impact on average order value (AOV)
  • Have reasonable expenses that match your budget
  • Are proven to reduce cart abandonment
  • Offer flexible payment terms for your shoppers
  • Pose minimal risk to your customers and business
  • Boost conversions to increase sales
  • Are dedicated to the satisfaction of your customers
  • Foster a sense of trust and promote loyalty

In short, you want a win-win situation for your business and the shoppers that trust you enough to buy your goods. You want to partner with an installment payment provider that matches your level of care and concern throughout the shopping-payment cycle.

A Brief Overview of Some Popular Installment Payment Systems

There are many options to choose from, and we’ve provided a detailed account of several installment payment systems in our resource: The New Installment Payment Landscape. Here is a quick rundown of three popular systems:

  • Affirm: This option requires a credit check and application and reports to credit bureaus. It’s an omnichannel solution available in the US (online and brick and mortar) that calculates interest rates based on an applicant’s creditworthiness (from 10 to 30% APR). Installment options range between 3 to 36 months, depending on the merchant.
  • Klarna: This option is widely available in multiple countries, is omnichannel, and offers three choices for payment: 4 interest-free monthly installments, financing (0 to 29.99% based on credit rating) or pay in full in 30 days.
  • Splitit: This is a credit card-based installment payment solution that works with a shopper’s existing Visa or Mastercard and does not charge any added fees or interest. No applications or credit checks are necessary. Installment options can go up to 12 months, depending on the merchant.


Each installment option has its own features that will appeal to different segments of your customer base. These options can be right for your ecommerce system when they best match the needs of your customers.

For example, Splitit works best with higher value purchases such as mattresses, furniture, fine jewelry, and exercise equipment. It allows shoppers to make their dollars reach farther by having more time to pay for purchases that will last for many years to come. Since Splitit works with shoppers’ available credit, it’s a safe way to stick with a budget and still enjoy large purchases right away. 

By contrast, Klarna is a great choice for that shopper who wants multiple payment choices, loves in-app shopping and rewards programs, and wants to spread out payments for smaller purchases such as clothing, electronics, home goods, and footwear. It’s a way to break down cost walls for everyday purchases without a huge time commitment.

If you are still on the fence about whether to provide an installment payment system, it’s time to jump. Research what is best for your customers and business and get your ecommerce platform connected today. At Splitit, we are ready to answer your questions and help you get started. Contact us now to find out how you can help your customers pay small and shop big.