Payment and installment plans continue to gain popularity and for good reason, as they allow customers to access a product or service without committing to the full cost up front. Instead, they can pay for the product in installments over a set period of time — often without interest or with minimal fees for the buyer.
By reducing the barriers to purchase, sellers broaden their reach and maximize their chance of conversion — helping transform interested audiences into paying customers!
This article dives into payment plan types, Stripe’s installment plan options and the pros and cons of offering these to your customers.
We'll also take a look at how Checkout Page does payment plans a little differently, and how to set up and sell a payment plan in minutes with Checkout Page.
What is a payment plan?
A payment or installment plan is a solution that enables buyers to divide the total cost of a purchase into smaller, more manageable amounts and spread those out over a set period of time — commonly on a monthly basis — until the full price of the purchase is covered.
‘Buy now, pay later’ (BNPL) payment plans take the form of a loan or credit option, where the buyer borrows from a loan provider — like Klarna, Afterpay/Clearpay, Affirm or Zip — via the payment processing platform.
The seller is paid in full upfront and the buyer pays off the loan to the loan provider over time.
Buy now, pay later plans come at a cost to sellers, which typically consists of a percentage of the sale, plus a flat fee.
For example, Klarna applies a $5.99% + 30¢ fee to transactions within the US, and an extra 1.5% for international transactions. If the product you sell gets lost and goes into dispute with the buyer, a further $15 fee is applied.
In order to make an informed decision around offering a buy now, pay later service through Stripe, it’s important to review the associated fees of each provider you are considering.
Another type of installment plan is a phased payment where the total cost is split into a number of parts to be paid at an agreed frequency — for example 25% of the total each month for 4 months. In the latter case, the seller is not paid in full until all the installments are paid.
This kind of plan is popular for sellers offering a product which is delivered over time — e.g an online course that takes place over 6 months.
What is Stripe?
Stripe is one of the leading payment processing platforms for businesses of all sizes, from startups and individual creators to established brands.
The platform has a reputation as a reliable, secure and flexible payment processor — thanks to its ease of use, the variety of payment processing solutions it offers and its adherence to high security standards.
Stripe customers can accept a wide range of payment methods in numerous currencies and offer payment options such as Stripe installments — making it a perfect fit for online and digital creators wanting to lower the barriers to purchase and sell to a global audience!
Should you offer payment plans to your customers?
Offering payment plan options to customers has many positives for both the seller and the customer. Because buy now, pay later services do come at a charge to merchants, there is some weighing up to be done around fees taken by the provider relative to the increase in conversion rates you could enjoy.
For larger purchases, or when the value that your customer is going to receive is spread over time (e.g an online course), giving customers the opportunity to pay in installments increases the chance of conversion.
As this Stripe buy now, pay later guide states:
“Businesses that accept buy now, pay later services on Stripe have seen a 27% incremental uplift in sales volume. These payment methods offer customers the ability to immediately finance purchases and pay them back in fixed installments over time.”
Pros of offering payment plans to customers
Offering an installment plan to customers brings key benefits, including:
✅ Broader customer reach: By offering buy now, pay later options, you can appeal to a diverse range of customers, especially those from younger age groups, opening up opportunities to tap into new demographics.
✅ Encourages larger transactions: Providing the flexibility to pay over time can entice customers to make more substantial purchases, as they are not constrained by paying the full amount upfront.
✅ Increases conversion: Allowing customers to split payments may result in them considering additional items or higher-priced products, ultimately leading to an increase in the overall size of their orders.
✅ Get paid upfront: Upon payment via a ‘buy now, pay later’ service, you receive the full transaction amount immediately, regardless of the customer's installment status. The provider takes on the risk of customer fraud which offers you protection.
Cons of offering payment plans to your customers
While there are many positives to offering a buy now, pay later payment plan option to your customers, there are some considerations to balance:
🤔 Fees: Buy now, pay later providers like Klarna do apply transaction fees which vary from between 2% - 8% depending on provider and region. Klarna’s fees range from 3.29% to 5.99% plus 30¢. depending on which part of the world you are based in, and international transactions, currency conversions and lost delivery disputes keep the fees rising.
🤔 Customer relationships: Introducing a buy now, pay later service adds an intermediary between you and your buyers, which has the potential for increased complexity in the case of disputes or refunds.
For many, the increase in sales volume is a worthwhile trade off for the fees and customer relationship shifts that these services imply — however it’s always worth taking time to consider these factors in the context of your business and customer relationships.
Can you offer payment plans with Stripe?
Yes, there are a number of ways you can offer customers a payment plan option with Stripe, including no-code and low-code solutions as well as more customized code based integrations.
Code based payment plans with Stripe
For those wishing to invest in a customized payment solution, Stripe offers a number of developer tools. These enable people with coding skills to create bespoke payment set-ups for taking a range of payment methods, including recurring payments — which enable ongoing payments for continued access to a product — and the installment/subscription model which Checkout Page uses to deliver its phased payment plans.
No-code payment plans with Stripe
No-code payment options are user-friendly methods for anyone — regardless of coding experience — to set up secure checkout pages. No-code options enable speedy setup times, lower development costs, and a streamlined experience for both sellers and buyers.
Payment plans with Stripe Checkout
Stripe Checkout is a user-friendly pre-built payment form which enables users to create and embed no-code checkout pages directly into their website, or redirect customers to a secure Stripe-hosted payment page.
Stripe Checkout supports one-time payments and subscription options and can be set up with a variety of payment methods, including credit cards, Apple Pay, Google Pay and buy now, pay later options like Klarna and Afterpay.
Buy now, pay later payment plans with Stripe
By partnering with providers such as Klarna and Afterpay, Stripe is able to offer a range of plan options.
Each provider has different offerings and terms related to credit limits, repayment terms and merchant location, and so it is important to review these when deciding which services are the best for your needs.
Benefits of offering buy now, pay later payment plans with Stripe
Some key features of each service are:
- 👍 Klarna:
- Customers can choose from different payment methods like ‘Pay in Installments’, ‘Pay Later’, and financing.
- Pay in Installments allows customers to split the cost over three or four interest-free payments.
- Pay Later in 30 days allows customers to complete a transaction and pay the full amount later at no extra cost.
- Provides options for customers with financing based on their preferences.
- 👍 Afterpay:
- Afterpay, known as Clearpay in the UK, allows customers to split their payments into interest-free installments.
- Offers ‘Pay in 4’ for smaller purchases and finance options for higher-value orders with monthly interest-bearing installments in the US.
- Initial spending limits are set for new customers which increase over time, rewarding responsible spending habits.
When you probably shouldn't use buy now, pay later services via Stripe
In addition to the benefits buy now, pay later options provide to both sellers and buyers, it's important to note that these services may not align well with your business if:
⚠️ Your clientele consists primarily of businesses, as buy now, pay later methods on Stripe are designed for consumer use only.
⚠️Your business heavily depends on subscription-based or recurring transactions, as current buy now, pay later options do not accommodate invoicing or subscription services.
In addition to the B2B and subscription restrictions, each provider prohibits certain business categories as follows:
- Klarna
⛔ Prohibited business categories include:- Charities
- Political organizations, parties, or initiatives
- Afterpay:
⛔ Restricted business categories include:- Alcohol
- Donations
- Pre-orders
- NFTs
Whatever your unique business and customer base looks like, take the time to review Stripe’s buy now, pay later partner offerings to ensure they are a good fit.
Stripe & Checkout Page
Partnering with Stripe, Checkout Page allows sellers to offer a payment or installment plan to their customers — and we do things a little differently!
Our payment plan uses Stripe’s subscription service to put our customers in the driving seat when it comes to creating a plan that fits best for their product and customer base.
Unlike buy now, play later plans, with Checkout Page, there are:
✅ No 3rd party intermediaries between you and your customers!
✅ No additional fees to the seller for using the feature
Additionally, the following key features of the plan are placed fully in the seller's control:
✅ Amount per payment
✅ Frequency of the installments
✅ Duration of installments
The payment plan feature can be used in conjunction with features such as an initial setup fee or deposit, and an adjustable free trial period — making it much more flexible and customizable than a buy now, pay later plan from a 3rd party provider.
Example Six month payment plan template
Let’s take a look at how Checkout Page customer Gigantic uses the payment plan option in conjunction with other features to offer phased payment to an audience interested in their live multi-week training programs:
Gigantic’s Product Leadership course costs a total of $1,499 is set up as follows:
- Initial $99 refundable deposit (Setup fee)
- Payment plan with 4 monthly payments of $350 ($1400)
- Start date (charge of first payment plan cycle) set to start of cohort (25 March 2024)
As Gigantic demonstrates, not only can you make a high-value product much more accessible to a wider audience, but you don’t end up paying the fees that get applied with buy now, pay later!
It is possible for the customers to cancel these payment plans midway — meaning you are not guaranteed to receive the full payment — however the risk of customers not paying all their installments is low in the contexts that these payment plans are suitable for.
For example, if the installments all need to be paid ahead of an event, attendance will only be possible for those who have paid in full. For online courses where the payment spans throughout the course, customers will typically have made enough of an up front financial and time commitment to want to miss out on completion by ending their payment early.
Some tips to bear in mind to mitigate the risk of loss when selling a product in installments are:
- Take an upfront payment or deposit: Be clear about whether and up till what time it is refundable.
- Offer incentives for completing the plan: Motivate customers to stay engaged with the full subscription by offering discounts or bonuses for completing the entire program. This could be a completion certificate, access to bonus content, or a discount on future services.
- Focus on customer retention: Providing excellent value throughout the duration is key to keeping people on board
How to sell payment plans / installments with Stripe & Checkout Page
Let’s take a look at how to use Checkout Page to set up a course on an installment plan basis, which takes advantage of some of the other features that Checkout Page offers.
Step 1: Create a Checkout Page
The process starts with a very simple page creation form, which enables you to name your product, and select from a number of pricing options including ‘Payment plan’:
Step 2: Customize your payment setup
On this same initial form, you get to offer your customers a trial period before they pay, a payment start date and an initial setup fee, as we saw in our Checkout Page customer example above:
Step 3: Choose how you will use your Checkout Page
This form enables you to choose how you will use your checkout page; either as a hosted page accessible via a URL, or as embed code to be placed on a website. You also get simple layout options for your page:
Step 4: Add your product description
Adding a punchy, concise description to let customers know exactly what they are purchasing is made quick and simple with your product setup form:
Step 5: Add images to your Checkout Page
The Image Gallery allows you to add images and make your product page stand out in a couple of clicks!
Step 6: Customize your page to match your branding
Checkout Page gives you simple options to adjust the key features of your page, such as background, button and text colors, so you can match your branding.
Step 7: Share and embed your Checkout Page
Once you are ready to share your page, you can select from a link, embed code and QR code options, to make your product more discoverable by more potential customers.
Step 8: Preview your Checkout Page design
At each step of the way, you get to preview your page as it would look to a customer and make changes and adjustments in a few clicks until it’s ready to share.
Conclusion
In this article, we’ve looked at different types of payment plan, what Stripe offers in this arena, and why offering payment plans to customers can mean your product is more accessible to a wider audience and the barriers to purchase are reduced when compared to full up front payment.
As well as the positives, we’ve looked at some cautions and restrictions to bear in mind when weighing up whether payment plans are suitable for you and your customers.
We took a look at a Checkout Page customer’s setup that’s working brilliantly for them, showcasing the payment plan option in conjunction with other features.
Lastly, we have looked at how quick and simple it is for you to set up your no-code product page using the payment plan option, and have it ready to share with an audience in minutes!
If you'd like to get started selling a product using our payment plan feature, why not make life easy and start with one of our payment plan templates.
If you’d like to learn more about the practicalities of selling digital products, why not take a look at our article How to sell digital products with Stripe and Checkout Page, and if you are looking for inspiration on turning your ideas into a reality this year, take a look at Best digital products to sell in 2024.
