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Case study

Germany: boost your online sales with payment on instalment

Wednesday 11 November 2015 | 09:12 AM CET

Miriam Wohlfarth, RatePAY: Merchants should not underestimate the service factor unlocked by offering smaller, staggered payments

Payment on instalment has been part and parcel of German retail for many years. As a service provider in this field, it has been our aim to ensure this payment option becomes mainstream in German ecommerce too. It has worked: ever more online retailers know that payment on instalment represents an additional service which increases customer retention and sales. Women are especially under-valued sales drivers, especially those who buy luxury goods online.

When RatePAY was founded back in 2009, payment on instalment was the reserve of mail order businesses and banks offering traditional sales financing. Our vision was to make payment on instalment just as popular in ecommerce, particularly as Germans already pay for insurance, season tickets and electrical appliances in instalments. Payment on instalment was seen as too complicated for online shopping. What teething problems did German ecommerce face in adopting this payment option?

Speed is vital

It was initially important to make German online merchants aware that transaction speed is key. Our risk assessment processes are online and in real time. It includes a highly complex, fully automated algorithm to check the buyer’s identity and creditworthiness. We only use data necessary for the checkout process; no additional information such as a payslip is required. The entire process is conducted online and paperless.

Payment defaults are a thing of the past

Payment on instalment is “insecure”, as is invoicing. This means that merchants bear the cost of transactions in advance. This is where RatePAY comes into play: we provide merchants with not only complete transaction processing including risk assessment and dunning processes, but also a full payment guarantee. Because of this, every merchant can offer their customers the popular payment on instalment option without risk.

Merchants recognise the potential, but underestimate the service factor

In a recent study (Source: ibi research, “Der Online-Ratenkauf unter der Lupe”, 2015) almost half of all German merchants surveyed stated that consumers are increasingly requesting payment on RatePAY case study, Novemver 3, 2015 Page 2 of 4 instalment and that this option must therefore be offered. Our work has really been worth it! Yet the fear that customers will be unable to pay still prevails. Some merchants are missing a trick: payment on instalment is no longer just for customers who are unable to settle the full amount at once, but is now also popular with customers who want to retain a degree of flexibility in their financial situation. Even though they might be able to pay the total amount up front, they simply prefer to not. After all, payment on instalment is similar to payment on invoice (by far the most popular payment method for online shoppers in Germany), except that payments are smaller.

Women want the latest designer handbag – NOW

As a woman myself, dare I say: there are some shopping phenomena which men will simply never understand. For example, spending an eternity searching online for the new season’s must-have items. Then, all of a sudden, you find it: the designer handbag which goes with EVERYTHING. And you don’t even have to pay the full amount upfront? Well, it would be rude not to click buy. Online shops should not underestimate the service factor unlocked by offering smaller, staggered payments. For many merchants, offering payment on instalment is a promising strategy as they compete with bigger shops, especially given that payment on instalment, as we are seeing with our customers, is not only suited to large shopping baskets.

Payment on instalment has become widespread, but there is room for more growth

According to the study mentioned above, merchants could increase sales and customer satisfaction and acquire new customers by integrating payment on instalment into their portfolio. In addition, the average value of the shopping basket and the conversion rate increased for over half of all merchants. Payment on instalment has become incredibly popular, in part thanks to service providers such as ourselves. However, there is still work to do: merchants recognise sales potential, but still too often misjudge the service factor. We believe this to be one of the most important arguments in favour of payment on instalment.

About Miriam Wohlfarth

Miriam Wohlfarth is Managing Director and co-founder of RatePAY, with responsibility for the divisions marketing and sales. She has been working in the e-payment sector for 15 years. Prior to founding RatePAY, she was country manager Germany of Ogone, a leading European Payment Service Provider with international reach. Before joining Ogone (Ingenico Payment Services), Miriam Wohlfarth was mainly in charge of establishing the online payment business of Royal Bank of Scotland (RBS) and for its payment service company, Bibit, in Germany.

About RatePAY

RatePAY is a payment service provider offering local DACH payment methods with a payment guarantee for merchants. The company provides e-payment solutions to online shops, taking over the complete payment process for online merchants, while bearing the full risk of any default payments. The products offered by RatePAY include instalment payments with real-time online checks that do not require any Postident procedure. Moreover, the company offers the online payment methods open invoice and direct debit. RatePAY GmbH, based in Berlin, was founded in December 2009 and is a member of the Otto Group

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