Shop Pay Installments is a payment solution offered by Shopify that lets users buy more expensive products without leveraging credit card debt.
Below, you’ll learn about the benefits of Shop Pay Installments for businesses, how it works, and how to set it up on your Shopify store.
What is Shop Pay
Shop Pay is a fast and secure checkout process designed for Shopify stores. It allows customers to save their shipping and payment information, making future purchases on any Shopify store that has Shop Pay enabled quicker and more convenient. Shop Pay also offers advanced fraud protection and real-time order tracking for customers.
By using Shop Pay, merchants can provide a more efficient and secure checkout experience, which can increase customer loyalty and drive more sales.
What is Shop Pay Installments?
Shop Pay Installments is a new feature that allows customers to break down payments into installments on Shopify stores that allow this. Since Shop Pay already has the customer’s payment data, it will charge monthly payments to the customer’s credit card until the full sum is paid out.
What Shop Pay Installments does for merchants is the improvement of customer service by offering customers a flexible payment option. This can increase sales and decrease cart abandonment rate. Instead of receiving payments in parts, merchants receive the full payment upfront from Shopify, making this a secure and risk-free payment option.
What is Shop Pay Installments Premium?
On its own, Shop Pay offers business owners an excellent opportunity to delight customers with a convenient, affordable payment experience.
As the demand for Buy-Now-Pay-Later (BNPL) and flexible installment options has increased, Shopify has invested in creating more advanced versions of its service. In July 2023, the company announced the arrival of Shop Pay Installments Premium.
The Shop Pay Installments Premium package works in the same way as the standard package. However, with the Premium package, companies can offer customers the option to access an interest-free payment plan for up to 12 months. Plus, there’s also an option for offering monthly installments, with interest, for up to 24 months on orders between $50 and $17,500.
What are the Benefits of Shop Pay Installments Premium?
Shop Pay Installments Premium is designed to give businesses a way of expanding their customer base, and increasing consumer loyalty, with longer terms and interest-free payment options. Currently, the solution is available only in the United States, for eligible merchants using Shopify Payments.
Shop Pay Installments Premium offers all of the same benefits of Shop Pay Installments, as well as some bonus extras, such as:
- Longer term lengths: With Installments Premium, companies can provide terms of up to 24 months, attracting shoppers who might struggle to pay for an order in a shorter time frame. Offering longer terms could even entice customers to spend more with your brand. Plus, you still get paid the full price of the order up-front.
- Interest-free payments: Interest can be a headache for customers who want to spread out the costs of their transactions. With interest-free payments on Installments Premium, your customers won’t have to pay any interest for up to 12 months. There are also no hidden or late fees for customers, which can improve your brand reputation.
- Increase buying power: Shop Pay Installments Premium is ideal for companies selling high-value, high-cost items. Some customers can struggle to make big purchases, but are willing to spread the cost over a longer period of time. With Shopify, companies can rapidly overcome pricing objections, and encourage customers to complete their purchase.
- Boost order value: As checkout prices increase, customers are more likely to find longer terms and interest-free payments more appealing. With Shop Pay Installments Premium, you can attract more customers, and make your products more accessible. According to Shopify, early access merchants on the platform increased the average sales by 9.3%, and their average order value by 3.9% just by using Shop Pay Installments.
How to Access Shop Pay Installments Premium
Currently, Shop Pay Installments Premium is free to access to selected merchants on Shopify. To access the service, you’ll need to be based in the United States, and you’ll only be able to sell in USD. You’ll also have to activate both Shopify Payments, and Shop Pay.
Keep in mind, Shop Pay Installments is powered by Affirm, and after you activate the service, Affirm will periodically review your store to ensure you’re compliant with their terms and conditions. If you violate Affirm’s policies, your account may be suspended.
How does Shop Pay Installments Work
After choosing Shop Pay Installments as the payment method, customers are offered two options to select from. Either four biweekly interest-free payments for orders ranging from 50 USD to 999.99 USD or monthly payments for orders between 150 USD to 17,500 USD.
The latter may be paid in three, six, or twelve months depending on the customer’s total. Monthly payments incur a 10% – 36% annual interest rate.
Customers can see their payment schedule and the amount due for each installment in their Shop Pay account. The merchant doesn’t run a risk of non-payment because they’re paid upfront by Shopify, and the customer then pays monthly installments to the platform itself.
The merchant does have to pay a 5.9% + 0.30c Shopify fees for Installment orders. It’s not charged on top of the standard card processing fee, though, it’s charged instead of it.
Shopify Shop Pay Installments Pros and Cons
Using Shop Payments has several advantages that make it a popular payment gateway option for online store owners.
- Simple set-up process, requiring only four steps.
- Diverse payment capabilities, allowing customers to pay via their preferred method and choose a payment schedule.
- Potential to draw in more sales by breaking down the upfront payment into smaller ones.
Despite its advantages, Shop Payments also has some drawbacks to consider.
- Merchants are charged a 5.9% + 0.30c fee on transactions that is not returned upon chargeback.
- Limited pool of serviced locations — only available in 17 countries.
- Potential for fund freezing (suspicious activity or transactions, disputes, or chargeback mistakes).
Frequently Asked Questions
What is the minimum order value for Shop Pay installments?
Shop Pay Installments can only be used for orders that fall between 50 USD and 17,500 USD, which includes discounts, shipping fees, and taxes.
Which Payments Methods Are Accepted By Shop Pay?
It is necessary to have a supported card such as Visa, Visa Debit, Mastercard, American Express, or other cards accepted by the online store you are making a purchase from. Capital One cards aren't accepted.
Are there any restricted items?
Among the restricted items there are weapons, including parts and accessories. Narcotics. Regulated products such as alcohol, tobacco, or drug paraphernalia.
Common Problems with Pay Installments
Limited use countries and industries, occasional spontaneous fund freezing due to disputes.
How to Handle a Return with Pay Installments
If a customer paid for an order using Shop Pay Installments and you need to refund them, you will need to return the payment to the customer. However, the Shop Pay Installments transaction fee will not be returned to you when you issue the refund.
Conclusion
Shop Pay Installments is a powerful payment option that can help merchants increase their sales and give customers more payment options. With the option to split purchases into smaller payments, customers are likely to spend more per visit and abandon their cart less.
The only drawback to the merchant is that the fee for Shop Pay Installments is higher than the regular one. This may be offset by an increase in spending.
You can try to experiment with this payment method to see if the increased fees are covered by spending and decide whether to continue offering it or return to standard ones.
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