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Get on Board: Pay-Over-Time Options are Transforming Ecommerce

One of the fastest growing trends in ecommerce today is paying over time in fixed monthly installments. It has disrupted the traditional credit industry to become a $1.8 trillion ecommerce opportunity in the United States. What online store wouldn’t want a share of that pie?

While the practice of paying over time may still be new for some Americans, it’s been popular in other countries for years. In Australia it accounts for 8-10% of all online sales. In Brazil, 54% of all purchases made online in 2017 were paid in installments, according to Ebanx. And in the UK, two-thirds of millennials buy with monthly payments when shopping online.

Many millennials do not have a credit card. This demographic came of age during the Great Recession, watching revolving credit card debt hurt their families’ finances during that time. 

Instead they’ve adopted mobile-first payment methods like pay-over-time financing that better fit their tolerance for debt and desire for convenience. With a provider like Affirm, for instance, shoppers see the entire cost of their purchase up front, with zero late fees or surprises. 

Younger consumers see these new payment options as necessary, said Gartner Senior Analyst Derek Stubbs in an interview with Vogue Business

Your ecommerce businesses can capitalize on this buying preference by offering customers a pay-over-time platform. If you’re still on the fence, the information below will give you more clarity about the opportunity for your business.

What is Pay-Over-Time? 

The pay-over-time method is a modern, more convenient twist on an old practice. For years U.S. shoppers have had a “layaway” option in some department stores that works in a similar way. 

Shoppers pay for an item, like a sofa, via monthly installments over a set period, and afterward they own the item. This form of financing has helped make expensive items more affordable for many budget-conscious consumers.

How Does Pay-Over-Time Work? 

Let’s use the example of a customer looking for a new flat-screen television that’s big enough to fit on her family room wall. She finds a TV she likes at an online store called Acme Electronics, priced at $800. The next steps take us through her journey and show how it works to buy with monthly payments.

1.The customer discovers the offer to finance the purchase. 

A message near the TV’s price on the product display page invites her to consider monthly payments as a way to buy the TV. $800 is a little more than she wants to pay up front, so the pay-over-time option gets her attention — especially since it’s a 0% APR offer, meaning she won’t have interest charges if approved. The invitation message includes a link to apply for financing with a pay-over-time provider, such as Affirm.

2. She creates an account. 

The customer clicks on the link and provides her name, phone number, date of birth, email address, and the last four digits of her Social Security number. The information is processed in seconds by the payment provider’s underwriting technology, and the customer is instantly notified about the approval decision right on the screen. The message includes the total amount she’s approved to spend, and this process does not affect her credit score.

3. She chooses to buy the item.

 At checkout the customer selects the pay-over-time option, choosing from among 3-, 6-, or 12-month repayment terms. A window pops up showing exactly what she will owe each month, including any interest. (In this case it’s an interest-free offer, but some transactions may include 10-30% APR. In some cases, a down payment may be involved, depending on credit approval. There is no annual fee.)

4. The ecommerce merchant is paid immediately. 

The merchant is paid the full amount, minus the fee for the financing provider. Acme Electronics’s partnership with the pay-over-time provider frees the store from collecting customer installment payments. 

5. The customer pays the financing provider. 

The customer makes regular monthly payments according to the schedule she agreed to. The financing provider, in the case of Affirm, does not charge any hidden or late fees, collecting only the total agreed to at the time of purchase.

In the end, the customer completes her payments by the due date and is happy she got the TV she wanted without having to stretch beyond her budget. The buying experience was simple and clear, and she’s likely to use this payment option again for her next big-ticket purchase. She may also recommend it to her friends. 

The gains for the online store, Acme Electronics, include a sale with a price tag that might not have been as high without the customer choosing to buy with monthly payments. The positive experience she had, and the knowledge that she can pay over time for her next electronics purchase, might also lead her to become a loyal Acme Electronics customer for years to come. 

The advantage of paying over time is the increase in value achieved for both the customer and the ecommerce business. Let’s dive deeper into how this payment method benefits online retailers.

Why is Pay-Over-Time Compelling for Customers? 

Shoppers appreciate the flexibility of paying over time. It can help them spend responsibly without overextending, while still buying what they want or need today. 

1. It’s more budget-friendly for customers. 

Waiting to save a lump sum of cash for the entire price of a new mattress or furniture item, for example, is not always practical for shoppers. Giving them a pay-over-time option can increase their spending power so they’re able to buy what they want or need and make monthly payments that fit more comfortably into their budgets.

2. Consumers favor brands that offer flexible payments.

With U.S. credit card debt at an all-time high, many shoppers appreciate being able to pay with an alternative to credit cards. In addition, 60% of shoppers think more favorably of brands that offer flexible payment methods. 

 6  Reasons to Bring a Pay-Over-Time Solution Into Your Store

Giving your shoppers more flexibility with payments can bring surprising benefits for your business. These are great ways to add value for both customers and your bottom line.

1. Reach new customers. 

This high-value group of shoppers has embraced pay-over-time options as a simple, straightforward way to finance large purchases. And the estimated spending power for millennials and Gen Z is over $2.5 trillion, according to YPulse. That’s an opportunity you can’t afford to ignore.

2. A pay-over-time solution can increase your average order value. 

This is powerful: At Affirm we’ve seen lifts up to 85% for average order value (AOV) among our merchant partners. Giving shoppers a fair and honest way to pay over time can lead them to a more informed decision to buy. Once they see what they can spend and exactly what they’ll owe — with no hidden fees and no surprises — shoppers can commit to adding more to their carts. 

3. You can reduce abandoned cart rates. 

Paying over time removes price as a barrier for many of your customers. This can benefit your bottom line by reducing cart abandonment up to 11%, according to one study.

4. Reduce return rates. 

When shoppers have the option to pay over time, they often make more deliberate purchases, which can lead to fewer returns. Some fashion retailers have seen return rates reduced up to 15% after offering Affirm as a payment method. 

5. Accepted internationally. 

As mentioned earlier, paying over time is a popular payment option for ecommerce in many countries. Some economic projections indicate this method of payment is on track to double its market share by 2023

These advantages work for ecommerce businesses in a wide variety of industries, including fashion, travel, automotive, home & lifestyle, jewelry, outdoor gear, and more.

6.  Ease customers’ minds. 

Let’s face it: handling personal finances can cause stress. Just think about the paragraphs of fine print that come with a credit card. Nearly 40% of consumers don’t know the interest rates on their credit cards because the average agreement is 5,000 words long — that’s more than twice the number of words in this blog post! 

And the complexities of deferred interest and hidden penalties — which often lurk in those long passages of legalese — can come back to bite you. That can lead to a debt spiral.

Your business can offer a pay-over-time solution, however, that’s easier to understand. Partner with a provider that puts customers at ease with up-front transparency into financing terms and repayment schedule. 

A simple, straightforward breakdown of monthly payments must be communicated at checkout without fine print “gotchas.” This kind of transparency is just what consumers expect from brands today, and it can facilitate healthier financial habits. 

Most importantly, the financing provider you choose should never prey on customers’ misfortunes by charging late fees, which can also push them into runaway debt. Affirm was founded over eight years ago with a commitment to never charge late fees.

Offer Pay-Over-Time Financing on Your Ecommerce Website 

Several financial services companies, like Affirm, can partner with you to offer pay-over-time financing for your ecommerce business. As you consider giving customers the option to buy with monthly payments, these three questions can help you decide what’s best for your business.

Questions to consider: 

1. Does financing make sense for my business? 

You’ll want to consider things like your average order value and inventory categories. If you have a low AOV, it may not be cost-effective to engage a pay-over-time platform. Your business may not be eligible to offer this kind of financing if you primarily sell groceries or alcohol, for example.

2. Is the solution compatible with my ecommerce platform?

Most of the companies that specialize in pay-over-time solutions have advanced technology that easily works with ecommerce platforms.

3. Are my customers interested and eligible? 

As more ecommerce shoppers embrace paying over time, they may be asking if it’s available on your site. Also, the mix of credit profiles in your customer base may be a factor to consider. You’ll want to check on the underwriting process of any potential financing provider to make sure it will likely approve many of your customers who are interested in monthly payments.


Payment methods that allow consumers to pay over time are projected to be the fastest growing online payment preference over the next five years, according to financial technology leader FIS. This projection alone should drive plenty of FOMO among ecommerce companies that don’t offer this payment solution.

Tom Musbach avatar

Tom Musbach is a content marketing manager at Affirm focused on B2B content. His career as an editor and content producer includes positions at Bank of the West, Yahoo, and PR Newswire.