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The Business Case for Card-Based Installment Payments: Put Payment Options to Work for You
As a business owner, you have no shortage of tasks and responsibilities pulling you away from your main goal: to sell a product or service. After all, selling goods and services, or an idea, is likely why you started your business in the first place. This is where it pays to have a tool in your back pocket or a strategy ready to implement in order to run your business as efficiently as possible while increasing your sales.
Sounds like an impossible task, doesn’t it?
While there are no guarantees or one easy solution for your business, there is one strategy you have access to right now that can potentially change the trajectory of your venture. Offering a card-based installment payment option for your shoppers is quickly becoming one of the most effective ways to increase your bottom line.
Why card-based installment options boost business
Anyone can say they are able to impact your sales or profit, but let’s look at exactly how card-based installment options make a difference. An installment option breaks up a shopper’s payment into smaller, more manageable payments.
Installment options may sound simple, but to get the most out of a card-based installment options takes a little bit of planning. It’s important to offer your shopper the most one that offers the most advantages. This includes a payment option that offers:
- 0% interest
- No installment or application fees
- Works with an existing credit card
- No impact to a shopper’s credit score
- No additional paperwork
- Seamless checkout option and experience
- Allows the shopper to choose the payment increments that works best for their budget
Splitit’s own research has found 47% of online shoppers say the availability of 0% interest is the most important consideration when choosing an installment option. This means when you do pick , make sure it’s one that fully meets the needs of your shoppers, especially the 0% interest aspect.
Not all Buy Now Pay Later (BNPL) options are created equal. Choosing one that benefits your shopper the most, ultimately benefits your business the most too.
The right card-based installment option boosts your business in the following ways:
- Reduced cart abandonment and higher conversion rate
- Increased Average Order Value (AOV)
- Increased sales and revenue
- Increased loyalty and overall positive shopping experience
There are other benefits as well, including greater payment flexibility for your shopper and a lower likelihood of a product return. Let’s look a little closer at the biggest impact a payment option brings to your business.
Reduced cart abandonment and higher conversion rate
How many online shoppers do you convert to actual buyers? If you run an online store, you know how frustrating answering this question is on a daily basis.
Cart abandonment is a real threat to online retailers. You never know why someone does not complete a purchase. It could be a pricing or shipping issue, or it could simply be the shopper changed their mind. Whatever the reason, cart abandonment leads to decreased conversions, and both of these scenarios are
Although conversion typically refers to an online purchase, someone could argue an in-store shopper can be difficult to convert too. This is why, whether you are online only, a brick-and-mortar location, or a mixture of both, you need every advantage available to you to convert a shopper into a paying customer.
According to research conducted by Splitit, 35% of shoppers are more likely to buy online if they are offered interest free monthly installment payments. Imagine appealing to one-third more of your shoppers, simply by offering them a convenient, flexible way to pay for their goods.
Recently, Splitit interviewed the retailer Sofa Club, and the Marketing Manager, Olivia Smith, talked directly about the benefits to the retailer’s conversion rates. “We have been really happy with Splitit, and decided to increase our installment offering from 3 to 6 months, which led to a 2.6% increase in conversions on our website” explains Smith.
While a higher conversion rate may be somewhat elusive to a retailer, a card-based installment payment is one tactic to help increase this number and improve your bottom line.
Increased average order value
Average order value, or AOV, is the average amount a shopper spends with you each time a purchase is made. It could be one item, or several items. Whatever the case is, the higher the AOV means you’re bringing in more revenue.
Getting someone to spend additional money requires an effort. No one can take any shopper’s dollars for granted these days, especially coming off a challenging economic period with COVID-19.
One proven method of increasing your AOV is to offer a card-based installment option that motivates your shoppers to increase their budgets. If you offer an installment option for six months, suddenly an item that costs $200 is now $33.33 per month. This puts it into a category that’s much more affordable to your shopper, therefore they might be able to purchase the more expensive item after all.
Splitit’s research has found 25% of online shoppers would increase the size of their purchase if given the option to choose interest-free monthly installment payments. If you could increase 25% of your shopper’s average order value, what would the number look like?
Recently, the furniture store Rubeza realized the impact an increase in AOV makes. After partnering with Splitit, the UK furniture retailer experienced a 30% increase in AOV in less than a year after implementing the new installment plan. Not only did they see this increase, but there was a 6% decrease in their cart abandonment rate.
Increased sales and revenue
The reason so much attention is paid to the e-commerce metrics like cart abandonment, conversion rates, and AOV is because they all support one central goal: increased sales and revenue. After all, as a business owner you have to meet your revenue targets in order to stay afloat and grow.
Fortunately, the right card-based installment option can lead to increased sales and revenue. Currently, the average increase in sales for merchants who incorporate Splitit’s card-based installment payment is approximately 12%. Other BNPL providers also report strong increases in their sales after implementing the option. For some merchants, increases range from 10%-15%.
MiStore Portugal, which is the official reseller of Xiaomi in Portugal, incorporated Splitit’s card-based installment plan as an option for their shoppers. SInce doing so, the reseller’s revenue has increased 200% since late 2020.
Overall improved shopping experience
No matter how unique your product or service is, competition is still fierce. If you’re not competing for your shopper’s wallet, then you’re competing for their time to browse and purchase on your site. Offering an installment plan option at checkout is one way to improve a shopper’s overall experience, and increase the chances of completing the sale.
If the experience is memorable, then the shopper is more likely to return to you the next time they need the product.
But this goes beyond your website. This is also true of your shopper’s mobile experience. Mobile shopping continues to grow and is projected to reach $12 billion by 2024. This statistic is a critical reminder of how seamless both your online and mobile checkout experience has to be for each user. If there are too many steps at checkout then you lose your shopper’s attention. If your installment payment plan takes too many additional steps, then you give your shopper one more reason to forget the purchase and jump ship.
Splitit has surveyed hundreds of shoppers and found 85% would return to a store because it offers an installment payments solution. It’s clear that offering a flexible payment option with as many benefits as the card-based plans offer, leads to a higher chance a shopper will choose your business again.
When it comes to your business, adding a card-based installment option is a smart move. But not just any option will do.
Instead, offering the option with the most advantages to your shoppers, is the one that leads to higher conversion rates, increased AOV, sales and revenue, and an improved shopping experience. If your business does not currently offer this option, there may never be a better time to consider adding it to your business tools so you can be as competitive as possible and provide more reasons for your shoppers to do business with you.
If you’d like to learn more about how Splitit can easily be integrated into your business payment center, request your free personalized demo here.