In the minds of many consumers, credit card spending is closely aligned with hefty interest fees. Emerging payments giants are reinforcing this stereotype by boasting “no hidden fees”. Yet, application fees are part of the equation along with APRs that can fluctuate between 10-30%.
The Need for Interest Free Installments
Payment installments are picking up steam in the US and Europe, with giants like MasterCard Europe, PayPal Credit and Amazon Pay all currently in the game. Often times, however, these consumer financing options do include interest fees and application fees, which eventually take a heavy toll on the customer’s wallet. This is so common in fact, that consumers have been conditioned to think that this is the norm and to be expected.
But high interest rates shouldn’t be a foregone conclusion.
Remember the days when free delivery didn’t exist? Or same-day shipping and free returns wasn’t on anyone’s radar? Today, these are considered ‘a given’ by most shoppers. So much so that companies not offering these “perks” aren’t able to compete in the current marketplace.
You heard it here first: the same scenario will play out with interest-free installment payments. In a few years, any brick and mortar or eCommerce that doesn’t offer an interest-free financing option on existing credit cards, will be unable to compete, losing customers.
This is where Splitit comes in. Splitit allows consumers to pay in interest-free installments on their existing credit cards with no burden of alarming interest rates or need for an application process. This is a financing option that benefits both consumers and merchants.
An interest-free payment solution on existing credit cards is an obvious payment choice for consumers in six countries worldwide (Brazil, Israel, Greece, Turkey, Mexico and Argentina) and has been around for decades. In fact, in Brazil, 80% of all eCommerce purchases are through credit card installments.
The US is a prime market for payment installments, and consumers are just starting to learn about them from the big payment players in the industry. While we’ll continue to see merchants increasingly offer consumers more favorable financing options, merchants who are interested in building customer loyalty and increasing sales should keep in mind the “free deliveries” model of payment solutions and offer interest-free monthly installments.