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On trend and in control — buy now, pay later is flexing a new muscle in the US

By Cetin Duransoy, Global Head, Visa Installments

Installment payments are growing at an incredible pace. While a somewhat new concept in the US, they have made headway in markets around the world, such as Brazil and Mexico, representing another choice for individuals to manage money.

This year, we are witnessing a remarkable transition to digital commerce, from people seeking new, safe ways to pay, to a boom in eCommerce. Consumers are eager for convenience, speed and safety of digital technologies — from shopping online to tapping to pay, curbside pickup and in-app purchases. In Visa’s global Back to Business study, 78% of consumers said they have changed their shopping habits in the wake of COVID-19, including shopping online whenever possible, using contactless payments at checkout and using less cash (1). Alongside the prominence of contactless is the rise of installments, or “Buy Now, Pay Later.” 

Installments is flexing new muscle in 2020/2021 and addressing the need for flexible, innovative payment options in the US. It has grown 2.5x as fast as credit cards – representing $1.7T globally in addressable payment volume in 2019 and it is rising approximately 20% year-over-year (2).

In addition, nearly three-quarters of U.S. cardholders find installments helpful for budgeting and 70% say it alleviates the stress of making large purchases (3). With strong momentum and consumer trends pointing toward the desire for flexible payment options, installments is set to become a foundational payment feature at checkout in the US, as it continues to grow around the world. 

More than our parents’ layaway

Gen Z and millennial generations are like no other, especially when it comes to matters of the wallet. As digital natives, they are the most prominent group of online shoppers and their mindset is driving expectations for managing and moving money. They are turning to installments to embrace customization around budgeting and purchases. 

According to 451 Research, more than 1 in 3 consumers aged 18-37 say availability of an installment payment option has influenced their decision to buy (4). For many, the option to buy now and pay later can be the difference between ‘hopefully one day’ and ‘how about now.’ We believe that these generations will continue to pave the way for new purchasing habits.

Re-imagining installments with Visa

With Visa Installments*, we enable participating issuers to offer, and participating sellers to display, installment plans to select existing Visa cardholders. Through our work with financial institutions, we are enabling issuers to bring installments capabilities to their eligible Visa cardholders for qualifying purchases at participating sellers. 

Visa Installments utilizes a cardholder’s available credit on an existing Visa card. It aims to give cardholders the option to divide their total purchase amount into smaller, equal payments over a defined time period, often at no interest to consumers, before, during or after checkout, at the store and online and while travelling abroad – based on their available credit. Essentially, Visa’s technology enables participating sellers to check a consumer’s eligibility for installment plans offered by their card issuer at checkout. If eligible, the customer can view the offer on the screen, either on a payment terminal in store or checkout page online, and select to complete a purchase in installments.

Beyond the consumer appeal, installments are attractive to sellers, with many seeing an increase in average ticket size and average conversion rate when installments are available as a payment option at checkout. Participating sellers can simply leverage an eligible cardholder’s existing relationship with their participating financial institution to present Visa Installment payment options at the point of sale – online or in store – through an API-based integration. With Visa Installments, we are helping our issuer clients with simple and elegant ways to respond to their customer demands for more choices in how they pay using their existing credit card and increase their cardholders’ loyalty. 

Installments; win-win for the ecosystem

With the move to digital-first experiences, we can add installments to the list of consumer expectations for speed, safety and convenience in how they pay. We are excited about great momentum in the US market, as we help unlock new ways for partners and clients to interact with shoppers and give individuals more choices in how they manage their money. 

Learn more about Visa Installments and connect with our team.

*Visa Installments is presently not available on all Visa cards and only offered by certain issuing financial institutions and accepted at select retailers. Contact your issuer to see if your Visa card is eligible for installments and for more details.

  1. Visa Back to Business Study, Survey of 2,000 SMBs, 4,500 consumers in eight markets
  2. Euromonitor Consulting: Installment Payment Opportunities, April 2020
  3. The Payments Report, Q1 2018. Installment Plans, Loans, and Balance Transfers. Auriemma Consulting Group. April 11, 2018
  4. 451 Research’s Q2 2020 Voice of the Connected User Landscape survey