Thought Leadership: The Bright Future of Installments in Canada

Brian Weiner, Visa Canada

Just over a year ago, the world experienced an increase in need for convenient, fast and flexible payment options, with retailers realizing the importance of offering expanded options to shoppers in order to navigate the “new normal” of the COVID-19 pandemic. Installment payments – or buy now, pay later (BNPL) – is a phenomenon that gained significant momentum. Emerging as a simple feature at checkout, installments ultimately adds a new layer of flexibility in the consumer shopping experience, both in-store and online. It is no longer our parents’ layaway, but an increasingly common option for purchases of all sizes, and is growing its footprint quickly in the broader payments ecosystem.

Installments have been popular in markets like South America and Europe for a long time. In Brazil, 50% of all purchases made on credit cards are on installment payments.¹ In fact, installments represent an enormous segment of the payments system globally. In 2019, it accounted for $1.7 trillion CAD in global payments volume, according to the Euromonitor International 2020 Installment Sizing Report, commissioned by Visa. Globally, it is growing in adoption 2.5 times faster than traditional credit card payments.²

In the past year, we’ve seen an increase in demand in more mature markets, particularly among households with higher income. According to Shopify’s “The Future of Commerce”³ report, the number of Shopify merchants offering BNPL has increased by 60% since the start of the pandemic. The report also revealed that consumers from all household income levels were equally likely to have used BNPL in the past year, but higher income households use the feature more often.

Bringing More Flexible Payments to Canada

In Canada, interest in installments is growing quickly, with market conditions creating an environment ripe for disruption. Nationwide adoption has increased 30% in the last year alone⁴, and we expect the installment payments opportunity in Canada to be about $50B annually^5.

While the pandemic continues to challenge businesses to offer new, safe, and digital-first ways to pay, the innovations rising to the top are those that are improving the consumer experience, not changing it. In Canada and across the globe, BNPL is emerging as a flexible option for consumers, and is helping merchants find new ways to increase competitive advantage and offer more affordable financing options to customers.

The Installments Ecosystem

Consumers are looking for the flexibility to pay how they want, when they want, without breaking the bank. With Visa’s Installment solution^∗, we enable participating issuers to offer, and participating sellers to display, installment plans to select existing Visa cardholders.

Visa Installments gives eligible cardholders the option to pay for qualifying purchases with the cards already in their wallet, and there is no need for another line of credit. There is no additional borrowing to track and remember, no separate company to pay, and no other brand knowing your business. It provides shoppers the ability to divide their total purchase amount into smaller, equal payments made over time, with transparency at around when and what they will be required to pay.

Beyond the consumer appeal, offering installments can increase average ticket size and average conversion rate for merchants. For issuers, offering more flexibility to customers encourages loyalty. We are working closely with Buy Now, Pay Later lenders as they build out their Canadian presence and expand their merchant bases, to enable solutions to further extend the installments footprint across networks.

Our global vision is an installment solution built on the foundation of trust and responsibility – one that benefits both consumers and merchants alike.

We’re excited for what’s to come, and will have big news to share soon as we work with our financial institution and other partners to roll out more options and innovations in the growing installments space.

Learn more about Visa Installments.

¹ Euromonitor Global Installment Payment Opportunity Report

² Transunion Canada Industry Insights Report- Q1 2019

³ https://www.shopify.com/future-of-commerce/2021

⁴ Ipsos survey: Visa Credit Installments Research - September 2020

⁵ Euromonitor Consulting Data Compilation for Visa Inc. $CDN

^* Limited Availability