How Instalment Payments Are Changing the Retail Industry

The way people buy things has changed massively. Not long ago, big purchases meant saving up, using a credit card, or simply waiting until your salary enters your account. But now, a new way to pay is making waves: instalment payments. 

While it has always been around for purchasing houses and cars, this flexible payment method is making a big splash in everyday retail, no longer just for the big-ticket items anymore. So we’re in changing times, which means plenty of opportunities and getting a head start.

Understanding Instalment Payments

An instalment payment breaks down the total cost of an item into smaller, manageable chunks. Imagine wanting a new laptop but not having the full amount upfront. Instead, you pay a bit now and the rest in set payments. 

This approach gives flexibility, allowing people to get what they need without a hefty one-time hit to their finances.  

Types of Instalment Plans

Not all instalment plans are the same. It is important to know which types are out there, as they all have different terms, conditions, and uses.

Traditional Instalment Loans

• These are your classic loans from banks or credit unions. Think car loans or personal loans.
• You borrow a fixed amount and pay it back over a set period with interest.
• They are great for big purchases where you need a longer repayment time.

Point-of-Sale (POS) Instalment Plans

• Retailers or payment services offer these plans right when customers are buying something, online or in-store.
• Customers split the cost into smaller payments, making it easier to get that new gadget or furniture, this is particularly suited for the luxury or high-end industries.
• Buy Now, Pay Later (BNPL) services are a common example of this type.

Credit Card Instalment Plans 

• Work with credit card companies to allow customers to convert purchases into instalments.
• This adds value for customers already using credit cards.
• It is less of a direct offering, but still adds value.

Why This Matters to Retailers

For retailers, offering instalment payments can be a game-changer. It opens the door to a wider customer base, particularly those who might hesitate to make a large purchase otherwise. Here’s why:

Increased Sales

Allowing customers to divide payments into smaller, manageable portions makes higher-priced items appear more attainable. This strategy contributes to increased sales volumes and results in higher average order values. Customers are more encouraged to proceed with purchases when the financial burden is spread over time.

Customer Attraction

Modern shoppers, especially those beginning their purchasing journey, actively seek out flexible payment solutions. 

The availability of instalment plans can serve as a strong competitive differentiator. Retailers who provide these options are more likely to attract customers who might otherwise choose competitors offering similar payment arrangements.

Improved Conversion Rates

When customers are offered the option to pay in instalments, they are more likely to complete their purchases. 

The reduced financial pressure lessens hesitation at checkout, leading to a noticeable decrease in abandoned shopping carts. This ultimately translates to improved conversion rates and increased revenue.

Building Loyalty

Delivering a seamless and supportive payment experience fosters a sense of trust and strengthens customer relationships. Offering clear, transparent instalment plans communicates a commitment to customer convenience. 

This encourages repeat business and also cultivates long-term customer loyalty, guaranteeing greater customer retention.

Instalment Payment Risk For Retailers

While offering instalment payments can significantly boost sales, it’s essential to understand the potential risks and how to implement these plans effectively. It’s not all smooth sailing, so a bit of planning goes a long way.

• Fraudulent Transactions: With any online payment system, the risk of fraud exists. You’ll want to take measures to protect your business from unauthorised transactions.
• Managing Returns: Handling returns for items purchased on instalment plans can be complex. Clear policies are needed to avoid confusion and potential losses.
• Cost of Service: There is a cost to the service, either a percentage of the sales, or a service fee. This needs to be understood.
• Choosing Reliable Providers: Partnering with untrustworthy providers can damage your reputation and lead to financial losses.  

Implementing Instalment Plans Effectively

For retailers looking to integrate instalment payment options into their business, a strategic and well-planned approach is key. Here are some key takeaways:

Partner Up With Reliable Payment Gateway

When setting up instalment payments, it is advised to select a payment terminal that integrates smoothly with your existing online or point-of-sale systems.

Prioritise providers who offer robust security features and dependable customer support, as these factors are key to a secure and effective payment experience. This will limit errors, and improve customer satisfaction.

Train Your Sales Staff

It is important to provide comprehensive training to your sales team on the specifics of the instalment plans you offer. They should be able to articulate the terms and conditions with clarity, addressing any customer inquiries with confidence and accuracy. 

Display Clear Terms and Conditions

Transparency in payment terms is important for building trust and rapport with your customers.

Clearly present all relevant details, including interest rates, applicable fees, and repayment schedules, both on your website and in physical stores like the cashier. This will reduce confusion and potential disputes that might arise from miscommunication.

Develop Clear Return and Refund Policies

To prevent potential disputes and protect your business, establish well-defined return and refund policies for items purchased through instalment plans.

These policies should outline the procedures and conditions for returns and refunds, ensuring clarity for both your staff and your customers.

Start with a Trial Period

When possible, consider initiating a trial period to assess the performance of your instalment plans. This allows you to gather data on which plans clicks the most with your target audience, enabling you to refine your offerings accordingly. 

If the instalment plan is too rigid, then consider loosening the time-window for payment.

Partner with Established Financial Institutions

Working alongside well-known financial institutions will add credibility and trust to your offered payment plans. Customers are more likely to use a payment method that is backed by a name they know, such as Maybank or CIMB Bank.

Conclusion On Instalment Payment Plan For Your Customers

Growing your business in Malaysia requires understanding what your customers need, and that includes more flexible ways to pay. Providing options like instalment plans or BNPL can be a game-changer for retailers.

At Paydibs, we are more than just a payment tool. We offer the solutions that enable you to provide instalment payment plans to your customers seamlessly, both online and offline. We offer multiple payment plans including credit/debit cards, e-wallets, online banking and BNPL through our all-in-one Smart Terminal system.

Don’t lose out to your competitors and offer the payment flexibility that today’s Malaysian consumers demand.