Installment services a ‘win-win’ for both shoppers and merchants

In a world where the credit industry is swiftly transforming due to a strong growth in e-commerce and innovations such as fintech, installment services have become increasingly popular in enabling customers to purchase everything they want and need online, says Hina Kamra, senior product manager at Amazon Payment Services.

What sets installment facilities apart, she explained, is the “irresistible convenience” of online shopping combined with enhanced purchasing power and affordability.

“This has proven to be a winning proposition not only for shoppers, but also for retailers,” she explained. “Amazon Payment Services found that our credit card Installments offering helps in increasing the average online shopping basket size by 20-25 per cent, and in growing overall sales by 10-15 per cent.”

Unlike other consumer lending options, where customers often end up having to negotiate a payment plan with their banks, Installments allows the payment service provider to do all the heavy lifting for both retailers and shoppers.

As part of its mission to stay ahead of market trends, Amazon Payment Services rolled out its own Installments service years ago as a flagship service. When shoppers select this option, their purchases are automatically converted into installments with select banks, dispensing with the need for customers to call their banks. Instead, they can directly tap into the service by using approved cards issued by local and international banks.

“Merchants collect payments directly from the bank, while shoppers enjoy 100 per cent of the purchase value upfront,” Kamra said. “For legions of happy shoppers, this translates into making purchases, both large and small, more affordable through flexible payment plans, giving customers more spending power, and building implicit trust with the merchant throughout the process. It’s a win-win for consumers and merchants alike.”

She added that changing consumer habits have created an “opportune environment” for Installments. The lingering consequences of the pandemic have meant that shoppers today are less inclined to make lump sum payments in a single transaction. Although consumers continue to spend – data by the World Economic Forum in 2021 showed that, in many cases, they are spending more compared to pre-pandemic levels – their priorities seem to have changed significantly.

“While a typical customer’s digital basket pre-pandemic would mostly feature big-ticket purchases, it now ranges broadly from apparel and fitness gear to household essentials and daily groceries,” Kamra revealed. “Moreover, as consumers become increasingly financially sophisticated, they are re-evaluating their credit burdens and high interest rates on credit cards, and opting for alternative solutions.”

This is the critical market gap that Installments has filled, reshaping customer priorities by empowering them, simplifying the checkout process, and making their spending power truly work for them.

Hina also noted that this strategic shift in consumer spending has led many e-commerce providers to “rebuild” the customer experience by offering ways to restore their purchasing power – a key reason why an increasing number of merchants are adopting Installments as their preferred payment mode.

At the same time, with a huge list of items in their inventory, increasing the average order volume and reducing cart abandonment has become a key priority for retailers. Installments offer a superior value proposition for them compared to other modes of payment, as they benefit from an improvement in conversion rates, an increase in basket sizes and enhanced repeat purchases.

According to Worldpay's Global Payments report, instant consumer financing options such as Amazon Payment Services’ Installments were the fastest growing e-commerce payment method globally, projected to account for at least 10 per cent of payments by 2023 in the EMEA region. In addition, several studies also showed that helping customers pay for expensive purchases based on installments is a great way to build trust and secure ongoing revenue.

Kamra revealed that Amazon Payment Services today offers its Installments in partnership with more than 25 banks across four countries in the Mena region: the UAE, Saudi Arabia, Egypt, and Jordan. “By building these partnerships on behalf of merchants, Amazon Payment Services ensures that merchants spend less in terms of bank tie-ups and reconciliation, and receive the full payment upfront.”

“All this is wrapped in the convenience of offering a bespoke checkout experience for customers through a simple iFrame, a hosted API or redirection checkouts – an advantage that is reflected in the rising transaction volumes in this category,” she said. “As flexible payments become the preferred flavour of shopping around the region, it’s time for customers to harness the power of installments to expand their spending power, and for merchants to convert every customer’s wish into a reassuring sale.”

rohma@khaleejtimes.com