According to data from the Living Conditions Survey conducted by the Spanish National Statistics Institute (INE) in 2024, almost 36% of people in Spain were unable to cover unforeseen expenses. About 9% said they had considerable difficulty making ends meet. The country's economic situation has increased the demand for financing solutions in recent years. In this article, we examine one of these solutions: deferred payments.

Currently, more and more companies offer this type of delayed payment to their customers. Many businesses also use this payment solution to pay their suppliers. Below, we discuss the unique features of deferred payments, including how to implement them and their benefits for Spanish companies.

What's in this article?

• What does deferred payment mean?
  
• How does a deferred payment work?
  
• How do companies benefit from deferred payments?
  
• How to implement deferred payments in your business
  
• FAQs about deferred payments in Spain
  

What does deferred payment mean?

Deferred payment is a financing method that does not require customers to pay for a product or service when acquiring it. Depending on the company agreement with the customer or supplier, the amount can be paid in its entirety at a future date or split up into multiple payments.

Directive (EU) 2023/2225 classifies deferred payment as a type of consumer loan that carries risks for customers, even if the payments do not have related interest. For example, the Spanish fintech company seQura offers a buy now, pay later (BNPL) payment method without any form of interest or fees. The company only adds costs for payment delays if customers don't pay their instalments on time.

How does a deferred payment work?

Deferred payments work differently depending on the company's financing method. In general, deferred payments fall into two categories:

• Deferred payments in instalments
  This type of deferred payment divides the total amount into two or three instalments. In the majority of cases, the company or financial entity offering the service is responsible for evaluating and assuming the risk of the transaction. The most popular deferred instalment payments are credit card financing and BNPL payments, which are already used in 5% of online purchases in Spain.

• Full deferred payments
  In this case, the full amount is paid in one payment on the agreed upon date. The selected date depends on each case and is usually linked to a contract or invoice that acts as a binding document. Deferred payments are typically paid between one and two months after the acquisition of the product or service.

How do companies benefit from deferred payments?

Companies that accept deferred payments can see some benefits:

• Boosts sales: Customers enjoy greater payment flexibility. This can make purchase decisions easier and could improve conversion rates. In fact, according to one study by Stripe, businesses experienced a 14% growth in their earnings when offering BNPL payment options in addition to at least one other traditional payment method.

• Increases average order value: Customers are more likely to acquire high-value products if they can split the amount into several deferred payments. According to the same Stripe study, while offering deferred instalment payments increased the conversion rate for products of all prices – even in purchases of less than €10 – the boost in conversions was more significant for products over €100.

• Improves cash flow management: Companies can manage their cash flows more accurately and efficiently if they know when to make payments to suppliers and when to expect customers' deferred payments to clear.

• Protects against fraud: Companies that integrate deferred payments can enjoy an extra layer of protection. For example, they can delegate the management and risk of fraud to BNPL service providers. These providers are responsible for verifying and approving each request and are generally held responsible for a customer's non-payment.

There are clear benefits, but deferred payments also have risks. For example, Mercedes Olano – the Bank of Spain's Director General of Banking Supervision – says customers should regard BNPL payment methods as loans. She also states that: "[BNPL] is currently undergoing supervisory reviews with respect to conduct [...] related to the poor quality of explanations provided to customers and the inadequate delivery of precontractual information."

On the other hand, deferred payments to suppliers are subject to regulations, such as Law 3/2004 on Measures to Combat Late Payments in Commercial Transactions. They are also subject to its later 5 July 2010 amendment, known as Law 15/2010. This law states that customers cannot exceed the maximum period of 60 days to make the complete payment.

How to implement deferred payments in a business

Supporting deferred payments in a business is simple if the business has a modern payment provider and some legal processes that protect it from associated risks:

• Establish the deferment policy
  Businesses should define the conditions that customers, suppliers and other professionals have to accept. The most important conditions are deadlines, minimum and maximum amounts and type of payment (i.e. in full or instalments).

• Choose a provider
  Analyse the features for each deferred payment provider (e.g. fees for companies and interest for customers). This can help a business choose the most suitable provider. Fortunately, many BNPL payment methods impose no extra cost on customers if they make their payments on time.

• Add the option
  Businesses can integrate deferred payment providers into their payment technology stacks. This process will vary depending on the payment gateway. Using a modern payment platform such as Stripe Payments can help businesses begin to support more than 100 payment methods with just a few clicks on the Dashboard. For example, businesses can accept payments with some of the most popular BNPL options in Spain, such as Klarna, seQura, and Alma. If a company also sells products in a physical store, it can unify online and face-to-face payments with the help of Stripe Terminal. Terminal allows businesses to offer several payment methods to customers, including digital wallets that accept deferred payments, such as Apple Pay.

FAQs about deferred payments in Spain

When does a business receive the full purchase amount if customers use deferred payments in instalments?

The majority of providers of deferred payments in instalments (e.g. BNPL) allow companies to receive the full amount of a sale right away. This occurs even though the customer has only paid one instalment and includes the full amount minus processing fees.

Can a business offer deferred payments without using a payment provider?

Yes, businesses can sign private agreements with payment providers that stipulate how customers will make deferred payments. Some companies in Spain negotiate their own conditions directly with suppliers, distributors and customers. In these cases, it is typical to issue promissory notes before processing deferred payments.

Should businesses implement deferred payments?

Payment methods that provide financing have immediate benefits for companies. Stripe analysed 150,000 payment sessions with instalment payment options and at least one traditional payment method. Businesses saw a 14% increase in revenue due to BNPL methods. In addition, providing more flexible payment options boosted conversion rates and increased average order value.