Large retailers such as department stores, big box stores and home improvement stores have long offered in-house financing programs for consumers . These programs allow customers to make large purchases, such as major appliances and furniture, and spread payments over time with no interest (as long as they pay in full within a set time period).
Now, a new breed of installment payment plan  companies is springing up to offer retail financing solutions to even the smallest businesses. These plans promise to help you attract shoppers, compete with larger businesses and reduce financial risk. Here’s a closer look at the trend.
Why installment payments are striking a chord
As with so much else in our society, millennials are the major force behind the installment payment trend. While they’re not the only demographic that’s leery of using credit cards to finance purchases, they are most likely to shun credit cards. According to a survey by Bankrate , only one-third of adults aged 18 to 29 have a major credit card.
What’s made them credit-shy? Many millennials are determined to avoid excessive credit card debt after seeing parents or other family members struggle with it during the Great Recession. Others have already gone through the struggle of getting out from under credit card debt and don’t want to go there again.
Millennials are also more comfortable than older generations with using new financial technology such as digital wallets or budgeting and banking apps. This has enabled the rise of installment payment apps.
How it works
The exact specifics of installment payment plans may vary a bit from provider to provider. In general, however, they all promise:
- Fast credit approval for consumers, unlike traditional financing options or credit cards
- Ease of adoption for retailers
- Transparency into potential fees and penalties so consumers know what they’re doing at the time of purchase
Some plans offer installment options only for purchases over a certain dollar amount (usually a few hundred dollars); others enable purchasing low-cost items, like clothing, on installment. The first installment is paid at the time of purchase and the others are spread out (frequently on a biweekly schedule).
Some plans are tailored for e-commerce retailers and integrate with popular e-commerce platforms for small business, such as BigCommerce and Shopify. Others work for brick-and-mortar retailers as well.
How installment payment plans can benefit your retail business
Installment payment plans can help retailers capture customers who might not otherwise make a purchase. (When Square launched Square Installments last year, it reported 68% of consumers  were more likely to shop with a small or local business that offered financing options.)
Customers debating an expensive product are more likely to bite if they can spread the payments over time without incurring any interest. In a BigCommerce study , 36% of respondents say financing has enabled them to buy a more expensive option than they were previously considering; another 31% say they wouldn’t have made the purchase at all if not for financing.
The plans can also help get shoppers back into stores or onto websites for purchases they had decided against. For instance, e-commerce companies can email shoppers with abandoned carts offering the installment plan as an option to lure them to buy.
Small business owners stand to benefit in other ways, too. For example, installment financing plans pay merchants upfront, so there’s no waiting for your money. In addition, most plans assume all risk of fraud or nonpayment, which can be a big plus for e-commerce entrepreneurs.
Interested in installment plans? Here are some popular providers to investigate.
- Affirm 
- Afterpay 
- Blispay 
- Sezzle 
- installment payment plan 
- Square Installments 
Before signing up with any plan, be sure you fully understand the terms and conditions, as well as any merchant fees or other associated costs. Would you use an installment payment solution? Why or why not?