Installment Plans Set to Dominate 2023 Holiday Shopping Season

As the holiday season approaches, consumers and merchants are gearing up for a significant shopping period, accounting for nearly 20% of annual retail sales in November and December. A recent report by PYMNTS Intelligence, titled «The Role of Installment Plans in the 2023 Holiday Shopping Season,» sheds light on the growing reliance on installment plans, including buy now, pay later (BNPL) options and credit card-based installment plans, as a pivotal element of holiday shopping strategies.

Installment plans empower shoppers to split their expenses into a predetermined number of payments, often with minimal or zero interest charges. According to the report, a staggering three-quarters of shoppers are planning to embrace these payment options more extensively this holiday season. Specifically, 41% of shoppers intend to increase their use of installment plans for their holiday purchases.

Notably, younger consumers, particularly Generation Z and millennials, are at the forefront of this trend. Among those planning to increase their reliance on installment plans, 73% are somewhat likely to choose a merchant that offers installment plans through their existing credit cards over one that does not.

The primary driver behind the surge in installment plan usage during the holiday season is improved spending management, with 74% of consumers citing this as their motivation. This percentage rises to 78% among current installment plan users who plan to ramp up their usage during the holiday season. Convenience is the next significant factor, noted by nearly 60% of all installment plan users and 63% of those intending to increase their usage. Additionally, trust in the provider, the prospect of improved credit scores, and enticing rewards also play pivotal roles in consumers’ preference for installment plans. However, only a small fraction of users (24%) report using these plans due to an inability to pay for their purchases otherwise.

In terms of the types of purchases made using installment plans during the holiday season, clothing and accessories lead the way. Other popular categories include groceries, home furnishings, appliances, and consumer electronics.

Merchants can capitalize on this trend by offering installment plan options to their customers. The survey revealed that 22% of shoppers surveyed would be very or extremely likely to switch from a merchant that does not provide installment plans through their existing credit cards to one that does. Among consumers planning to increase their use of installment plans, a substantial 38% express a high likelihood of switching to a merchant offering this payment option.

Installment plans are poised to play a pivotal role in consumers’ holiday shopping strategies in 2023. Merchants looking to gain a competitive edge can do so by embracing installment plan options, potentially attracting shoppers who are willing to shift their allegiance away from retailers that do not offer this flexible payment method.

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