This Pay-in-Installments Firm Aims to Lower the Debt Risk for Consumers
As a new breed of installment payment companies are on the rise, letting customers pay later, so too are the detractors who claim consumer debt will soar as a result.
One solutions provider, Splitit, is aiming to eliminate that risk by offering installment payments to consumers while placing a hold on the credit card for the full amount.
Customers are only able to buy items through Splitit that their credit limit can cover. Rather than providing an additional line of credit to users, as in consumer financing, Splitit functions more like a financial management tool. Designed to protect both the merchant and the customer from possible default, the company said Tuesday it had raised $20.7 million.
Like its competitors, Splitit makes its money from merchant fees instead of through interest. Participating retailers such as Ace Marks and Infinity Shoes include Splitit as an option at checkout both in-store and online; customers don’t create an account but simply input their credit card information and select the number of desired installments. There are also no late fees; instead, the customer is beholden to the rules and penalties of their credit card provider.
“You’ve got the credit from your bank,” explained Gil Don, CEO and co-founder at Splitit. “Your bank underwrites you and decided to give you credit. We are just helping you use it smartly and better managing your cash flow at the same time. We are not creating a new debt for you.”
Whereas Afterpay and Klarna are popular with the millennial market, who may not even own a credit card, Splitit’s target demographic is older and interested in responsibly purchasing high-end goods. Depending on the consumer’s cash flow, they can choose the number of installments — for instance, a $400 pair of shoes could be paid over four months in $100 increments, or it could be paid over 8 months in $50 installments.
“We don’t want you to overspend,” said Don. “We’re saying that we will make it more affordable to you and make you more responsible for what you decide to buy.”
With its recent round of funding secured, in addition to the money it raised in January, Splitit is focused on expanding its global teams so it can scale service. The service is available in over 40 countries.
Watch the video below to see the industry’s top footwear players share more advice:
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