While retail has seen its fair share of difficulties since the start of the COVID-19 pandemic, installment payments technologies have reaped the benefits of the continued consumer shift to online and a tendency to avoid high credit card spending.
Splitit, which enables customers to pay for purchases with an existing debit or credit card by splitting the cost into interest and fee-free monthly payments, processed more $65 million in merchant sales volume, growing 176 percent quarter over quarter and 260 percent year over year.
The company reported strong retail adoption overall, with the number of e-commerce merchants using the Splitit service crossing the 1,000-mark threshold and growing by 104 percent. New apparel clients include Daily Sale and Tatami Fightwear, adding to a list that already includes Vestiaire Collective, Rat and Boa, Fashionette, Ace Marks and L’Envers. Total shoppers using Splitit grew 85 percent pace to more than 309,000.
In the second quarter, the average order value (AOV) of Splitit shoppers rose by 21 percent quarter over quarter to $893, with more than 90 percent of all transactions being e-commerce or mobile payments.
“While the pandemic has significantly accelerated e-commerce transformation for a variety of brands, the payments industry must support e-commerce merchants to better meet the cash management needs of shoppers,” said Brad Paterson, CEO of Splitit. “Our continued business growth and momentum signals that consumers are increasingly more open to and adept at maximizing their existing credit to preserve cash flow, especially when it comes to brands that help them stay in shape, support work and communications needs and improve their home environments.”
As expected, apparel retailers haven’t really been the source of the boon. Splitit said its second quarter growth was concentrated across several “high-demand” verticals, including sporting goods, housewares, home furnishings and electronics.
In June, the “buy now, pay later” provider announced a multi-year deal with Mastercard to provide its services at checkout, both online and in stores. The two firms will start pilot programs in three undisclosed markets before launching internationally to Splitit’s 27 markets, and will also develop installment and other related products together.
Over the past year, Splitit also integrated e-commerce platforms Shopify and Stripe into its app.
The Splitit news comes as more installment payments platforms continue to reveal milestones of their own throughout the pandemic. Afterpay crossed the 5 million active shopper mark in the U.S., with 1 million new customers joining the platform between March 1 and May 22. In June, Zip Co acquired fellow buy now, pay later platform QuadPay for $269 million, expanding the pair’s combined reach to more than 3.5 million customers and 26,000 merchant partners worldwide. That same month, Klarna launched its first rewards program, Klarna Vibe.
And Sezzle, an Australia-based platform like Afterpay and Zip Co, is reportedly looking to raise as much as $54.6 million, according to the Australian Financial Review. The potential funding comes as the company’s second-quarter merchant sales volume rose 58 percent to $188 million and total merchants increased 27 percent to 16,112.
Although interest-free installment payments have largely caught on in Australia and somewhat in Europe, the technology is still in its growth stage in the U.S. But that could soon change as more shoppers demonstrate a willingness to divide their purchases into manageable installments. According to Doxoinsights’ May survey of 3 million U.S. consumers, 40 percent say they would start paying off their credit with installments or will decrease their usual payments if they already carry a month-to-month balance.
As the COVID-19 pandemic continues to worry consumers as they attempt to make ends meet and reduce their debt, installment payments platforms are designed to alleviate credit concerns altogether by enabling shoppers to buy products without having to pay hidden interest fees, unlike a typical credit card.
The global buy now, pay later installments market is set to grow at a combined annual rate of 28 percent over the next five years, a February report from Worldpay FIS found.
“Merchants are first and foremost looking for solutions that convert browsers into shoppers. In order to do that, they need to offer the most premium checkout experience out there, which is where mobile technology is thriving,” said Casey Bullock, general manager for global eCommerce, North Americas, Worldpay Merchant Solutions, FIS. “Digital wallets and ‘Buy Now, Pay Later’ represent the art of the possible in a mobile-first consumer market, giving new tools to merchants who must open new doors to shoppers looking for more flexible and personalized ways to pay.”