Whether in store or online, easy payment in several installments and without interest is regularly offered. A convenience for the customer or an incentive to consume more?

Paying in three or four installments has become a real consumer phenomenon, regardless of the type of store: cultural or household appliance stores, department stores and websites. You can thus spread out payments for a smartphone as well as a luxury bag, a washing machine as well as a sofa. Is this easier for the customer in the event of a hard time or an incentive to over-consumption?

This is not a consumer credit

The split payment is not a consumer credit, it is a payment facility. It allows you to spread the payment but its reimbursement must not exceed 90 days.

How does it work? When paying for a purchase with your bank card, you ask for payment in several installments. It only takes a few seconds to obtain approval (often conditional on obtaining or having the payment card or loyalty program of the brand): once the bank card identifiers have been entered (unique number, validity date, cryptogram), a response is obtained in a few seconds, the granting process being automated. For payment in four installments, the first installment is debited on the day of purchase, then the following ones after thirty, sixty and ninety days.

This staggered payment is generally painless, as it does not involve any costs for the consumer, unlike consumer credit, which is based on a contractual relationship. It therefore offers more ease and flexibility to the purchasing process for the consumer than consumer credit.

A selling point for traders

This service has become a real marketing argument put forward by e-commerce sites and retailers. Because this incentive system considerably increases the purchase conversion rate. E-commerce sites in the fashion industry see increases in the average basket of more than 60% when they offer it. For 1 in 4 consumers, the payment service has even become a purchasing criterion. It is therefore an incomparable tool for persuasion and loyalty for e-retailers as well as physical points of sale. However, if payment in installments is generally free for the consumer, it is indeed a paid service, but the fees – which range from 1% to 3.8% of the amount paid – are billed to the retailer. The benefits are such for the latter that they generally choose not to pass these fees on to the customer.

To offer split payment, merchants call on two types of suppliers: traditional credit organizations (Oney, Cofidis, Floa Bank) or specialized technology companies (Alma or Pledg, etc.).

Ease of payment or incentive to over-consume?

Having immediate access to a property, even without having the full amount needed in your account, in a simple and quick way: this is the main advantage of paying in installments. A priori, the split payment allows you to spread the expense over several months and maintain the balance of your budget.

Moreover, according to a 2021 Kantar study, 37% of French people have already used payment in installments, and this figure is increasing.

A convenience in case of large expenses

According to a survey conducted by the Cetelem Observatory in March 2022, 55% of French people surveyed believe that this payment system is a one-off solution in the event of a financial problem, particularly in the event of unforeseen circumstances. Purchases over 500 euros are frequently paid for this way: 46% of French people choose it for household appliances according to a study carried out by Harris Interactive, 37% favor it for unexpected expenses and 36% for technological products, 23% for travel or sports equipment.

But which encourages people to buy more expensively and more

The problem: Not only will a hesitant consumer be more easily tempted to validate their basket if they can pay in installments, but if they are hesitant between two models, they will also be more easily tempted to buy the most expensive one, as their budget will thus be less constrained. According to the Cetelem survey, 61% of French people surveyed also think that this payment method can encourage them to purchase more expensive products.

Being able to pay in installments makes it easier to spend large amounts, but also to buy things that you don't necessarily need.

According to a FLOA – Kantar study on changes in payment usage in Europe, published in February 2022, while more than 50% of French people who use these payment facilities do so to balance their budget, 28% say they use this system to treat themselves! According to the same survey, 69% of French consumers surveyed are considering using installment payments for purchases under 500 euros. The organizations also note that there is no typical user profile: some are CSP + preferring to spread out their payments when they treat themselves, others are consumers on a tight budget wishing to better control their spending.

Towards more control?

This type of payment, which is experiencing such popularity, needs to be more regulated in certain cases.

Too easily granted

As we have seen, obtaining split payment is facilitated by distributors. Players in this market claim acceptance rates of over 90%.

Only cases of refusal:

Due to the nature of the bank card: systematic authorization cards, such as Electron and Maestro, prepaid cards, virtual cards, in particular, do not allow for easy payment

• If the bank card reaches the end of its validity period before the last monthly payment

• Suspicion of prior fraud

• Not supervised enough

Split payment is exempt from the constraints of consumer credit regulations, particularly in terms of consumer protection (pre-contractual information, presentation of the APR, right of withdrawal, right to early repayment, solvency check, etc.). This allows lenders to simplify the distribution process for their products.

Over-indebtedness factor

Easily obtained and without verification of payment capacity or other current credits, payment in several installments can accentuate the financial difficulties of fragile households if it is used too systematically or is added to other credits.

This is why the public authorities are considering putting in place safeguards. Possible options include: better information for the borrower before taking out the subscription, stricter control of their repayment capacity, usage limitations for certain goods and/or above certain amounts.