Split payments have become one of the latest retail common places as digital payment methods are advancing. It allows customers to make payments using more than one method in one single transaction, ranging from using cash together with a credit card or splitting the bill across multiple cards. Offering split payments to customers can help retailers make happy and increase sales among those customers. Like any new technology, it has advantages and disadvantages. Here is a rundown of what split payment options are, from benefits to disadvantages, and how retailers can best implement it for maximum effectiveness.
What are the Split Payment Options?
In simple words, split payment allows the customer to split his purchase across multiple payment methods. This really comes in handy if not enough money is available on one card or the customer prefers to pay a portion in cash. Split payments can be offered either online or in-store and can include:
Cash and Card – The cash is combined with either a debit or credit card to pay for one purchase.
Multiple Cards – Distributing the bill among two or more credit/debit cards.
Gift Card and Card/Cash – A combination of a gift card and another form of payment.
Installment Plans or Buy Now, Pay Later- A single purchase is to be broken down into multiple, smaller payments to be made over time.
types of split payment options in retail
In-Store Split Payments
Cash & Card Split: Most customers want to make at least half of the payment by cash and the remaining by card.
Multiple Cards: It is ideal for one who wants to spend two credits in one transaction, especially to maximize rewards or balance available credit.
Online Split Payments
Gift Card and Card Split: Allows a customer to pay a gift card balance and then make a remaining payment on the balance using a card.
Third-Party Payment Apps: Some online retailers add apps, like PayPal, Venmo, or Apple Pay, for customers to pay through a variety of alternatives in one purchase.
Buy Now, Pay Later (BNPL): Customers can spread their payments through services such as After pay, Klarna, or Affirm. They don’t offer split payments but enable consumers to finance their needs differently.
Advantages of Providing Split Payments in Retail
More control of purchases since an account can source funds from a pool of accounts or payment methods to make purchases, thus giving customers more freedom to manage their purchases according to their available funds. This would give customers even more flexibility with regard to their purchases depending on what funds are available within different accounts or modes of payment. This becomes the buying trigger for customers on tight budgets who can buy now and figure out how to pay later based on their resources.
Higher Sales and Customer Retention: Split payments will not result in deserted online carts as well as those in the store. For instance, if the available cash on one card is less, it is still possible to make the sale through multiple channels. The flexibility on payment matters will give retailers a reason to bring in more customers and retain them.
Competitive Advantage: Split payments will become a competitive advantage for retailers as the more customers expect diverse payment options. In addition to that, retailers by taking advantage of being early adopters of the trend, can attract tech-savvy customers, who generally prefer flexibility in their transactions.
A Higher Conversion Rate in E-Commerce: It is helpful in reporting higher conversion rates as customers are comfortable doing large purchases in installments. Split payment methods also reduce cart abandonment.
The following are some drawbacks of Split Payment Options:
Greater Complexity in Payment Processing: The multicart payments require the more complex POS systems that can process different payment systems concurrently. It may possibly be technologically and economically complex.
Chances of Getting Mistakes and Delay: When it involves two or more sources of payment, more chances of getting mistakes or delay in the processing process are prominent. For example, an error may occur between cash and card split as it is not monitored properly, hence dissatisfaction from customers.
Increased Transaction Costs: The other is greater transaction costs. For some splitting payments, such as BNPL providers, some retailers pay extra fees to process each transaction. This can cut into profitability; even more so if most customers use splitting payments.
Risk of Fraud: With this transaction having multiple payment methods, fraud becomes even harder to track down. This becomes especially important in the case of online split payments, where some fraudulent individuals may target such transactions by searching for site vulnerability in terms of security measures.
Implement Split Payment in Retail
Invest in the Right Technology: Choose a POS system that allows split payments and accepts credit/debit card, cash, gift cards, or digital wallets, among others. Some newer POS systems allow BNPL services natively, which can trim down the configuration process for online merchants.
Partner with Payment Providers: Partnering with reputable BNPL providers like Klarna or Afterpay can make the installment payments implementation process relatively easier. Most of these providers have streamlined integration processes and help with setup, payment processing, and customer support.
Staff Training: Employees must be trained on how to make split payments efficiently so that the service is not slowed down, and less errors are made. The training may include the following points: how the split payments should be processed differently, what needs to be looked for in avoiding common mistakes, and how to proceed in case of a system malfunction.
Update Your Return and Refund Policies: Ensure that your policies are clear regarding split payments. In case a customer makes split payment using a credit card and a gift card, you should explain how the return will be done in case of return. Clarity could avoid a potential misunderstanding by the customer and result in fewer complaints.
Promote Split Payments to Customers: Promote availability of split payments in the in-store signage, banner at website, and checkout pages. The best customers for using split payments would be those who are concerned about flexibility in payment.
Monitor and Tune: Track and report analytics on split payment transactions for insight into customer behavior. From analysis of transaction data, retailers will learn which split payment methods the customers prefer, whether they would increase actual spending or raise customer satisfaction. This is a valuable input which could be manipulated further to improve and optimize the setup and profitability of split payments.
Conclusion
Actually, split payments are, as they say, a win-win for the retailer and the customer. Ease of payments brings an opportunity for customers to finish the sale, cut down on cart abandonment, and heighten the experience of shopping. However, split payments also involve complexity of another kind-fuller transaction charges and more fraud. Retailers must be mindful of the pros and cons in maximizing benefits through taking best practices for split payments. In such a way, they can keep with the changing tastes of modern shoppers and be out in limelight among the competition in retail.