Paying in installments spreads the cost of a product or a service over a period of time. It allows customers to break down a payment into multiple periodic installments.

This payment method is often used for high-value purchases, making budget management easier for customers. However, there can be fees associated with installment payments, so it’s important for customers to carefully review the terms and conditions of the agreement.

In this article, we examine installment payments—what they are, how they work, their pros and cons, and more. Learn how to integrate this payment method into your existing tools to help boost sales and keep up with evolving customer habits in France.

What’s in this article?

• What are installment payments?
  
• What’s the difference between installment payments and deferred payments?
  
• How do installment payments work?
  
• In what cases should you offer installment payments?
  
• The pros of installment payments
  
• The cons of installment payments
  
• What are the most popular installment payment solutions in France?
  
• How to implement installment payments into your business
  
• Best practices for installment payments
  
• Integrate installment payments with Stripe
  

What are installment payments?

Installment payments allow customers to divide the total amount of a purchase into multiple payments. Typically, a third party manages the payments, while the business receives the payment in full when the customer makes the purchase.

Staggered payments can be beneficial to customers, as they promote cash flow management. The customer pays following a schedule that works for them and can make purchases they couldn’t afford otherwise.

What’s the difference between installment payments and deferred payments?

Deferred payments and installment payments are based on the same principle: the customer doesn’t pay for the purchase right away. However, these two flexible payment solutions work differently.

Deferred payment—also known as buy now, pay later (BNPL)—allows customers to pay after the purchase date. Therefore, they can benefit from the purchase immediately and pay for it later.

With installment payments, a portion of the total cost is typically debited at the time of the purchase. The product or service is delivered immediately, and the balance is paid off in later installments.

Supporting these payment methods can help businesses boost their sales, promote customer loyalty, and attract buyers who are looking for flexible payment solutions.

How do installment payments work?

Paying in installments involves the following steps:

• Select the option: At checkout, the customer selects the installment payment option. This is only possible if the business offers this service at their physical point of sale or online.
  
• Provide details: The customer provides their banking details and selects the installment plan type that works best for them. The payment schedule is defined at the time of the purchase.
  
• Make a payment: The customer finalizes the purchase and typically makes an initial payment. This payment is deducted from the total amount.
  
• Work with a third party: The business receives the full amount, while the service provider manages the financing and collects the payments.
  
• Manage payments: The customer is required to meet the payment deadlines. The balance decreases with each payment. Any interest charged is spread over the full installment plan so the full cost of the financing is covered over time.
  
• Pay fees: The customer might need to pay processing fees or late payment fees.
  
• Complete payments: Payment of the balance terminates the contract.
  

Failure to comply with contractual obligations could result in penalties or legal action.

In what cases should you offer installment payments?

If the products or services you sell are expensive and paying for them in one lump sum might be challenging for customers, installment payments can make them more affordable. Here are some factors to take into account:

• The type of product or service you offer
  Electronics, furniture, training courses, and luxury items can be expensive. Payment plans might persuade customers not to defer their purchases.

• Your customer profile
  If your target customer base includes young people or people with limited spending power, it might be worth offering payment in installments. This method could be more compatible with their spending habits.

• The competitiveness of the market
  Installment payments can help your business stand out from the competition and nudge customers to make purchases, especially if your competitors don’t offer it.

• Your business model
  Installment payments can help boost the number of subscriptions for businesses with a subscription-based business model. This is particularly relevant when initial costs are high. Integrating installment payments can also be hassle-free for online businesses.

When should a business offer installment payments?

There are plenty of good reasons for businesses to consider offering installment payments, including:

• When launching a new product
  
• When looking to grow their market
  
• When customers request it
  
• During high consumption periods
  
• During sales slumps or market uncertainty
  
• When the competition offers it
  

Supporting installment payments can boost customer satisfaction and growth.

The pros of installment payments

Installment payments can offer benefits to businesses:

• Promotes customer loyalty
  
• Enhances the shopping experience as a flexible, modern, and secure payment method
  
• Boosts sales volume and facilitates growth
  
• Makes integration with existing tools easy
  

The cons of installment payments

The are also drawbacks to this flexible payment option:

• Customers could overspend and fall into debt.
  
• The customers’ solvency isn’t verified.
  
• Setting up and managing installment payments implies extra costs.
  

In France, a payment in installments spread over less than three months isn’t considered a consumer credit. Under Article L312-4 of the French Consumer Code, consumer credits require that the borrower’s solvency be verified.

What are the most popular installment payment solutions in France?

The number of businesses offering installment payment solutions in France is on the rise. Each one offers unique features adapted to different aspects of the customer experience.

Klarna is a Stripe-compatible installment payment provider that offers its customers in France various payment options:

• Immediate payment
  
• Deferred payment (i.e., the customer pays in a single installment within 30 days of the purchase)
  
• Payment in three equal installments
  

Klarna prioritizes a user-friendly, smooth shopping experience. It allows customers to defer the full payment—without fees or interest—as long as the customer meets the payment schedule.

Alma is another installment payment provider available in France that integrates easily with Stripe. This French business allows customers to pay for purchases between €50–€2,000 in two, three, or four interest-free installments.

How to implement installment payments into your business

• Choose a provider
  Select a payment provider based on business size, customer preferences, and the type of products you sell. To make integration easier, choose a provider that offers an application programming interface (API) and reliable customer support. The provider should also offer your customers a user-friendly experience, from checkout to final payment.

• Integrate the solution
  Set up your interface so it supports the option to pay in installments.

• Inform your customers
  Present this new payment option to your customers, highlighting its benefits, terms, and conditions. Transparency is key—give a detailed description of how installment payments work, applicable fees or interest, and payment schedule options.

• Ensure compliance and security
  Your installment payment system should comply with regulations, and customer data management should be secure.

Best practices for installment payments

• Transparent information about terms and conditions
  Businesses should define the terms and conditions of repayment. They should also communicate payment schedules, interest, fees, and consequences of missed or late payments to customers.

• Reliable customer service
  Customers could have questions or experience issues with their payments, so providing excellent customer service is necessary. Timely and helpful answers can enhance the shopping experience and brand image.

• Flexible payment options
  Offering several different options allows businesses to better meet their customers’ diverse needs.

• Regulatory compliance
  It’s imperative to comply with all the regulations that apply to financing transactions.

Integrate installment payments with Stripe

Stripe users in France can easily enable installment payment options—such as Klarna and Alma—right from their Dashboard.

With Stripe, you receive the full payment at once, while your customers can pay over time. Stripe also offers a user-friendly payment process. The customer simply selects the payment option, signs in to their account with the provider, and agrees to the payment terms before returning to your site to finalize the transaction.

Integrating a payment in installments solution with Stripe can help you accommodate customer preferences and boost your conversion rate. Stripe Payments offers access to over 100 payment methods, enabling you to accept payments in more than 195 countries—no coding needed.