Installment payment plans allow customers to split purchases into smaller, incremental payments over time. This makes buying expensive products and services more affordable.
Offering flexible payment options through installments can benefit online stores in several ways:
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Increased conversion rates – Research shows that 2 out of 3 customers would spend 50% more if offered installments [1]. By letting customers finance large purchases, you can capture more sales.
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Bigger order values – Customers are willing to spend 67% more on average when paying with installments [2]. Higher order values mean more revenue for your business.
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Reduced abandoned carts – Up to 69% of shopping carts are abandoned due to extra costs, with high shipping fees being a major factor [3]. Installments help customers cover the total cost over time.
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Improved customer satisfaction – Customers appreciate having flexible payment options that work within their budget. Installments give them more control over how they pay.
With the rise of "buy now, pay later" services, offering installment plans has gone from a nice-to-have to a must-have for online retailers. This guide will explore the top ways to enable installments on your WooCommerce store.
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How Do Installment Payments Work?
Installment payment solutions allow customers to divide an order total into equal payments spread out over a defined period of time.
For example, a $1,000 purchase could be split into 4 monthly payments of $250 each. This makes the purchase more affordable by avoiding a large upfront cost.
When a customer selects an installment plan, the payment provider will verify eligibility. If approved, the full order total is charged to the customer‘s account in increments based on the payment schedule.
The retailer receives the money upfront, minus any fees, while the payment provider collects the installments from the customer. This shields the retailer from default risk.
Key Benefits of Offering Installments
Here are some of the biggest reasons to offer installment payments in your WooCommerce store:
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Increased sales and conversion – Over 67% of customers say installment plans make them more likely to complete a purchase [4]. By enabling installments, you can capture more sales from price-sensitive shoppers.
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Bigger order values – Research by Affirm found that average order values increased by 85% when customers used installment financing [5]. Customers spend more when they can spread out payments.
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Reduced cart abandonment – When faced with a large one-time payment, up to 87% of customers will abandon their cart [6]. Installment plans give shoppers a way to follow through with buying intent.
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Mainstream consumer preference – A study by Credit Karma found that 75% of consumers show interest in installment plans for online purchases [7]. Meeting this demand gives you a competitive edge.
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Access to high-value shoppers – Customers who use "buy now, pay later" services typically have higher-income profiles. Offering installments attracts lucrative customers.
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Easy to implement – Leading payment providers make it simple to enable installment plans through WooCommerce extensions. There‘s no need for custom development.
Based on these benefits, adding installment payments should be a high priority for any WooCommerce merchant selling high-ticket items online.
Top Payment Plugins for WooCommerce Installments
WooCommerce has a robust ecosystem of payment extensions. Here are some of the best plugins for accepting installments:
1. Affirm
Affirm is one of the most popular buy now, pay later solutions. Their WooCommerce extension allows customers to select from 3, 6, 12 or 24 month installment plans at checkout.
Key features:
- 0% APR financing for orders $50-$17,500
- Customers can choose from 4 interest-bearing plans
- Instant approval with no impact on credit score
- Affirm handles installment collection
- No setup, subscription, or hidden fees
Affirm is completely free to install and use. They have flexible qualification criteria making it easy to approve customers. You receive the full order amount upfront minus their fee of 3-19% based on plan terms.
2. Klarna
Klarna is a financing and payments company founded in Sweden. Their plugin lets you offer 3 flexible installment options:
- Pay in 4 – 4 interest-free payments over 6 weeks
- Slice It – 6-36 month financing with interest
- Pay Later – Pay the full amount within 14-30 days
Key features:
- Interest-free Pay in 4 option (0% APR)
- Integrates with popular payment gateways
- Klarna handles all repayment collection
- No extra costs or subscription fees
- Seamless WooCommerce integration
Klarna is free to use. You‘ll need to create a Klarna merchant account connected to your bank. There are no setup, monthly, or hidden fees – you pay a small transaction fee comparable to your card processor.
3. PayPal Pay in 4
PayPal‘s Pay in 4 installment solution allows customers to split purchases into 4 interest-free payments made every two weeks.
Their WooCommerce extension adds Pay in 4 as a payment option at checkout. If the customer is approved, the order total is split across 4 automated payments via PayPal.
Key features:
- 0% APR financing in 4 installments
- Instant approval process through PayPal
- No late fees or impact on credit score
- Seamless integration with PayPal payments
- Fixed fee that‘s competitive with PayPal standard pricing
Pay in 4 is available to any WooCommerce store accepting PayPal payments. It‘s a great way to provide interest-free installment plans with minimal effort.
| Provider | APR | Term Length | Approval Required | Fees |
|---|---|---|---|---|
| Affirm | 0-30% | 3-24 months | Instant | 3-19% of purchase price |
| Klarna | 0% | 4-36 months | Instant | Payment processing fees |
| PayPal | 0% | 6 weeks | Instant | Standard PayPal fees |
| Afterpay | 0% | 4 installments | Instant | 4% + $0.30 per order |
| Sezzle | 0% | 6 weeks | Instant | 7% flat fee |
| Quadpay | 0% | 4 installments | Instant | $1.99 flat fee under $250 |
Tips for Choosing an Installment Provider
With many options available, here are some tips for selecting the right installment payment method:
- Interest rates – Look for providers that offer 0% financing for qualified buyers. This makes installments more affordable.
- Flexibility – Seek flexible terms that allow customers some choice over installment amounts and duration.
- Approval process – Instant approvals remove friction from checkout. Ensure financing decisions happen quickly.
- Order value limits – Pick a provider that supports purchase amounts typical for your business. Higher limits allow more big-ticket orders.
- Geographic coverage – Make sure the provider operates in your target markets. Installment options should be available to all customers.
- WooCommerce integration – Choose a provider with a seamless plugin or extension for WooCommerce. This makes setup painless.
- Merchant fees – Compare the transaction fees to determine the true cost of enabling installments.
Balancing these factors will help you select the right installment payments partner for your WooCommerce store.
How to Integrate Installment Payments into WooCommerce
If you‘ve decided to offer installment plans, the next step is activating them in your WooCommerce store. Here is an overview of the setup process:
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Install plugin – Install and activate the plugin for your chosen installment provider using the WordPress plugin installer.
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Create account – Sign up for an account with the installment payment provider if required. This connects your store for processing.
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Configure settings – Configure any options in the plugin like terms, messaging, and eligibility rules. Connect to your payment provider account.
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Enable method – Activate the installment provider as a payment method under WooCommerce settings.
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Test checkout – Run through the checkout process and verify customers can select installment plans.
Once the plugin is activated, customers will be able to choose installment plans at checkout. The payment provider handles approving and collecting payments.
For detailed setup instructions, refer to our guides on integrating specific installment payment extensions:
Key Considerations When Offering Installments
There are a few important factors to consider when enabling installment payments:
A. Impact on Cash Flow
You receive full payment immediately (minus any fees) when a customer chooses installments. However, your accounts receivableshrink faster because you are paid in full upfront versus collecting payments over time. Keep this impact on cash flow in mind.
B. Accounting
Even though you receive full payment right away, installment purchases should be booked as a liability on your balance sheet until the customer finishes payments. Work with your accountant to ensure proper accounting treatment.
C. Risk Management
While installment providers approve and collect payments from customers, there is still some risk of losses from fraud or non-payment. Thoroughly vet partners to understand how they manage defaults before integrating their solution.
D. Customer Concerns
Some customers may be hesitant to use installment financing due to worries about debt. Communicate repayment terms clearly at checkout and highlight interest-free options to put customers at ease.
E. Compliance Requirements
If you operate in a regulated industry, there may be special disclosure or compliance rules around installment payments. Research requirements for your business before rolling out installments.
Optimizing Your Store for Installment Payments
Here are some additional tips for improving performance after adding installment options:
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Promote installments – Actively promote installment plans through product pages, cart messaging, email campaigns, and other touchpoints. Don‘t keep them a secret!
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Prioritize affordability – Make affordability-related messaging prominent throughout the buying journey. This primes customers to consider installments.
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Highlight interest-free – Emphasize options with 0% APR financing. These are most appealing for customers.
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Share customer stories – Collect and share testimonials from customers about how installments allowed them to buy. This builds social proof.
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Monitor performance – Track key metrics before and after launching installments to see impact on conversion, order value, and revenue.
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Iterate on terms – Experiment with different installment durations, amounts, and options. Fine-tune based on performance data.
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Train support staff – Ensure support teams are knowledgeable about installment options and can address customer questions.
Following these best practices will help you maximize the sales potential of installment financing.
Conclusion
Offering installment payment plans unlocks major opportunities for growth and conversion. By letting customers spread out costs over time, you can drive higher order values and capture purchases from cash-strapped shoppers.
Top providers like Affirm, Klarna, and PayPal make it easy to enable installments on your WooCommerce store. Their extensions provide everything you need to offer flexible payment options with minimal effort.
Just keep in mind the impacts on cash flow, accounting, and other operational factors when managing installments. With the right planning, promotions, and execution, installment payments can significantly move the needle for your WooCommerce business.
Sources:
[1] The Impact of Installment Payments on Customer Spending [2] New Data: Installment Payments Increase Average Order Value By 67% [3] The Impact of Payment Methods on Conversion Rates [4] Buy Now, Pay Later: Flexible Payments Are Driving Conversions [5] Affirm’s Bi-Annual Shopper Study [6] The Baymard Institute [7] The Buy Now, Pay Later Report
