Installment plan: what do traders need to bear in mind?

Christoph Brack

The instalment purchase is booming in online trade. No wonder, the integration promises a classic win-win situation: shoppers get more leeway in their purchases, retailers are happy about new customer groups, larger shopping baskets, higher sales, lower abandonment rates in the checkout and ultimately: a higher turnover.

So is the rate a no-brainer? If you believe the numbers, the answer is first of all a clear yes. According to an ibi-research study by the University of Regensburg*, the conversion rate improves by 35% with the integration of hire purchase, the average shopping basket increases by 65%, 54% more new customers are generated, customer satisfaction increases by 68% and the gross volume of goods by 70%. These are impressive values.

Not surprisingly, 58% of Germans would buy by instalment if they could. But what exactly motivates them to do so? Clearly, those who consider buying by instalment cannot or do not want to pay the entire purchase price at once. But it is by no means only people with a tight purse who buy by instalment. Especially larger purchases such as a new television or unplanned impulse purchases are often paid for by instalments, even by people with excellent credit ratings as part of their personal finance management. Simply because of the enormous financial flexibility that prevents them from having to stretch their budget to the limit.

Shoppers want a simple, fast, secure, flexible and trustworthy solution without a lot of hassle.

In addition, instalment buying is a convenient way to avoid taking out a loan, which tends to be seen as the last resort, especially in the DACH region. You have to reveal too much about yourself, you have to wait too long for your money. Payment by instalments requires much less data and can ideally be completed in real time.

Nevertheless, there are a few things to keep in mind. Because not all instalments are the same. Shoppers want a simple, fast, secure, flexible and trustworthy solution without a lot of hassle. Acceptance among customers rises and falls with smooth integration into the shop checkout, the trustworthiness of the instalment purchase provider and fast and professional processing. The conditions are also important. This is also confirmed by the above-mentioned study. For the merchant, uncomplicated processing is important. If it becomes an act of bureaucratic violence or if too many customers are rejected during the risk assessment, the hoped-for revenue generator can become an annoying cost factor.

So what does the ideal hire purchase solution for retailers look like?

Seamless integration into the checkout and easy handling are important. Without media discontinuity, without waiting times. Because trust plays a major role, a white-label solution is also a good idea, where the instalment payment option appears in the look and feel and under the name of the online shop. This way, your customers can make an instalment purchase from those they trust and from whom they have also made purchases.
On the merchant side, of course, it’s about a solution that is as easy to manage as possible and can be integrated into your own shop. And it’s about getting the total amount paid out immediately without having to bear the risk of default.

Ratepay is currently in the process of developing its own, fully digital instalment solution that is easy to integrate and ideally incorporates the points illustrated above. The Ratepay rate will be a white-label solution that can be seamlessly integrated into your checkout, including the assumption of default risk and aftersales communication. Thanks to our artificial intelligence-based risk assessment, you also benefit from high acceptance rates and optimal customer data management. And because transparency is extremely important to your customers, as it is to you and to us, we completely avoid cross-selling and other hidden costs. By the way, the ratepay rate is not only available for your online shop, but also as an omnichannel solution for the point of sale, for example.