As more customers shop online for products and services, online businesses must be able to serve customers in a timely manner. The introduction of flexible payments is a game-changer that is helping businesses accelerate growth.
Here is an example: The total revenues from online marketplaces during the festive week starting September 2024 increased by 26% compared to the same week in 2023.
A key driver of this trend was the ease of access to (Equated Monthly Installments) EMI options, which, in turn, helped businesses increase the Average Sales Price (ASP) of products. In this blog post, we outline eight types of flexible payments and the impact of this payment trend on online businesses.
What are flexible payments?
Flexible payments are an innovation that enables customers to seamlessly and efficiently access instant loans during the online shopping process.
- The key flexible aspects comprise the loan repayment tenure, interest rates, principal amount, and the EMI amount.
- Customers can choose an EMI scheme that best aligns the cost of purchases with their monthly cash flows. Once they have done so, they can receive instant approval.
- This facility opens up instant credit access to customers without the hassles of needing to take personal loans or own a credit card.
- Businesses receive the full payment upfront, while the credit institution directly recovers the full amount from the customer over the loan tenure.
8 Key tools for flexible payments
We deconstruct eight flexible payment tools that cater to consumer preferences:
1. Credit Card EMIs
This flexible payment tool is accessible to customers who possess a credit card. Customers can choose from a range of options regarding payment tenure, EMI value, and interest rates. The overall price of the product must align with a customer’s credit limit, and the customer may need to pay a small processing fee. Some credit cards offer unique offers for specific products and services, which can benefit customers.
2. Debit Card EMIs
Customers who are more comfortable using debit cards can avail the debit card EMI facility. They can choose the relevant EMI scheme as per their monthly cash flows. The selected EMI amount will be auto-debited every month from the linked savings bank account. Again, some credit cards may run unique offers on specific brands, which can benefit customers.
3. Cardless EMI
Newly banked customers may not possess a debit card or credit card. Cardless EMI is especially useful for these customers who have just started their digital financial journey. The customer can choose the EMI scheme as per their requirements. The EMI amount will be directly debited from their linked savings account each month.
4. Credit on UPI apps
A growing number of customers are transacting via UPI apps. A comprehensive payment flexible suite includes credit access on a customer’s preferred UPI app. The total cost price of the purchase must align with a pre-approved credit line via the app. The EMI amount will be directly debited from the savings account linked to the app or from the app wallet.
5. Brand EMIs
A branded EMI is curated around specific branded products that are popular with customers. This is an attractive facility for customers because aspirational brands come at a slight premium as compared to other products. Customers can choose the EMI terms as per their monthly cash flows and pay via their preferred tools, such as credit or debit cards.
6. No/Low-cost EMIs
In the case of some EMI schemes, interest is levied on every EMI payment. The interest amount drives up the overall cost of the purchase. This is where a no/low-cost cost EMI can help reduce the additional cost burden for customers.
- The most preferable option is a no-cost EMI. In this option, the customer pays only the cost of the product, and no interest is charged.
- A low-cost EMI scheme charges a small interest amount on each EMI, yet the amount is significantly lower.
7. Discounts, cashback, and special offers
Other popular forms of flexible payments include the following:
- Discounts: This option entails offering a reduced-cost price for a specific time frame, such as festivals. Businesses can take advantage of the facility when, say, a product’s expiry date approaches or during a clearance sale.
- Cashback: As the name suggests, online retailers can reward loyal customers with the promise of a percentage on the purchase cost. The amount can be transferred via digital wallets, credit cards, and other instruments.
- Special offers: Online retailers can design unique offers that differentiate their offerings from the competition. For example, businesses can curate a Buy One, Get One Free (BOGO) offer or combine complementary products and offer a special price for a limited time frame.
8. Buy Now, Pay Later (BNPL)
Buy Now, Pay Later (BNPL) is a key innovation that enables customers to purchase a product without making an upfront payment. Instead, they pay the entire amount in a lump sum on a fixed date. There are no installment payments, and typically, no interest is charged if the consumer pays the amount on the due date. The BNPL option is growing quickly, and by 2026, the BNPL market in India is expected to reach 30 million users.
Key advantages of EMI options
By offering flexible payments online, businesses can benefit in the following ways:
1. Increased revenues
Businesses do not need to reduce the price of products of a higher ticket size. They can charge the market value while offering the customer the benefit of staggered payments.
2. Higher conversions
Cart abandonment is a key challenge for businesses. By introducing flexible payments, companies can reduce cart abandonment and drive higher conversions.
3. Increased customer reach
Businesses can attract customers from a wide range of demographics rather than only serve more affluent customers. They can actively capture more market share by offering affordability options.
4. Reduced customer acquisition costs
Payment flexibility is a top customer retention strategy. Businesses can increase customer lifetime value (CLV) by encouraging repeat customers. In turn, they can reduce customer acquisition costs.
The Conclusion
Flexible payment solutions are helping businesses drive revenues by offering customers the power of choice. The eight key options comprise Credit Card EMIs, Debit Card EMIs, Cardless EMIs, Credit on UPI apps, Brand EMIs, No/Low-cost EMIs, Discounts, cashback, special offers, and BNPL. The key outcomes of adopting flexible payments include financial convenience, higher conversions, increased customer reach, increased revenues, and reduced customer acquisition costs.
Plural by Pine Labs offers Plural Gateway, a comprehensive payment solution that enables businesses to offer the full spectrum of flexible payments to consumers through a seamless user experience. Plural Gateway simplifies the integration process, reduces the set-up costs for businesses, and offers access to superior data analytics. They can enjoy a hassle-free integration experience and receive 24/7 support.
Reach out to us about your needs and start a conversation today.
