Instalment Payments: What Should Businesses Know

The global Buy Now, Pay Later (BNPL) services market is expected to reach 3.7 trillion USD in value and 900 million users by 2030.

These figures represent massive opportunities for businesses that want to increase average order values, reduce cart abandonment, and unlock demand from consumers who may not be willing or able to pay the full amount for purchases upfront. 

However, instalment payments also introduce new considerations around customer experience, settlement, risk, and localisation.

What are instalment payments?

Instalment payments allow consumers to split the cost of a purchase into multiple smaller payments over a defined period. Though the customer pays over time, the merchant typically receives the full purchase amount upfront from the instalment provider, minus any applicable fees.

Depending on the payment model, the instalments may be interest-free or include financing charges. The repayment schedules can range from a few weeks to years.

Types of instalment payments

Based on the financing provider:

• Credit card instalments: Consumers convert a purchase into a repayment plan through their credit card provider
• Consumer financing: A lender provides credit directly to the customer for a specific purchase with longer repayment periods than BNPL
• Merchant-funded instalments: The business absorbs some or all of the financing costs to offer customers interest-free instalments
• Bank-based instalment plans: Many banks offer dedicated instalment programmes that allow cardholders to split purchases into fixed monthly payments
• Subscription/recurring instalment models: Some businesses use subscription-based arrangements, allowing customers to spread costs over time.

Based on the repayment amount:

• Fixed instalments: Customers pay the same amount on each scheduled date
• Variable instalments: Repayment amounts may vary depending on interest calculations, outstanding balances, or promotional terms.

How do instalment payments work?

Step 1: The customer chooses an instalment payment option at checkout.

Step 2: The provider evaluates whether the customer qualifies for financing and approves the transaction.

Step 3: The purchase is completed, and the business receives the payment.

How do repayments work?

After the purchase is completed, the financing provider collects the repayments according to the agreed schedule.

Most providers automate this process by charging the customer’s selected payment method when each instalment becomes due. Customers are usually notified of upcoming payments and can access repayment information through a mobile app, an online portal, or an account dashboard.

If a payment fails, the provider may attempt to collect it again, apply late fees where permitted, or contact the customer to arrange repayment.

Benefits of offering instalment payments

• Higher conversion rates: Customers who hesitate to make a large upfront payment may feel more comfortable completing a transaction when the cost is divided into smaller, manageable amounts
• Increased average order values: When affordability becomes less of a concern, customers are often willing to spend more, especially on higher-ticket products or services
• Access to new customer segments: Instalment payments make products and services more accessible to a broader audience, including younger consumers, budget-conscious shoppers, and customers who prefer greater financial flexibility
• Improved customer experience: Offering instalment options allows businesses to align with changing customer preferences while creating a more convenient checkout experience
• Faster growth without compromising cash flow: Most instalment providers pay merchants upfront and manage customer repayments themselves, so businesses can benefit from increased sales and larger transaction values without waiting months to receive funds.

Challenges of offering instalment payments

• Additional costs and fees: Instalment payment providers typically charge merchants fees for enabling financing options
• Greater operational complexity: Supporting instalment payments often means managing additional payment providers, settlement processes, reporting requirements, and customer support considerations
• Regulatory considerations: Rules governing disclosures, lending practices, consumer protections, and repayment terms can vary substantially between markets, and navigating them can be challenging without local expertise
• Potential customer dissatisfaction: While instalment payments can improve affordability, they may also create negative customer experiences if repayment terms are unclear or customers encounter unexpected fees
• Dependence on third-party providers: If businesses rely on external providers to deliver instalment services, the customer experience, approval rates, settlement processes, and financing options may be influenced by factors outside their direct control.

Accept instalment payments with Unlimit

For many businesses, the debate is no longer whether they should support instalment payments. It is about how to fit instalment payments into their broader payment and expansion strategy.

In many markets, offering instalment payments is about creating payment experiences that align with local expectations, increasing affordability, and removing friction from the buying journey. However, for global businesses, instalment payments become increasingly complex due to varying consumer preferences, regulatory frameworks, and providers. Managing these differences through separate integrations and fragmented payment stacks can quickly become a barrier to growth.

Unlimit provides businesses access to hyper-local payment ecosystems through a single, integrated operating layer. Rather than managing multiple providers across regions, merchants can connect to a single platform to offer the payment experiences customers already trust. The result is a more localised checkout experience, improved payment performance, and a stronger foundation for international growth.

FAQs