Acquirers can capitalize on the fact that consumers no longer have to pay interest on their credit card purchases.
PayItSimple, a credit card installment provider, is seeking ISOs and agents to promote its service to merchants. The Herzliya, Israel-based startup introduced its software in the United States last week.
"No-interest installment payments on existing credit cards are new to the United States, but there are a bunch of countries in the world that offer it already," said Stacy Fassberg, the companys vice president of marketing. "In those countries, the use of installments is anywhere from 30% to 50% of all credit card transactions."
Fassberg provided an example of how the no-interest installments work. Suppose a consumer charges a $5,000 television, she said. The merchant can, for example, offer a five-month payment plan of $1,000 installments.
If the purchaser accepts, the cashier swipes the card and its subject to the standard authorization process for a $5,000 transaction.
But the PayItSimple platform tells the merchants system to capture $1,000. The authorization for the $5,000 purchase remains valid for about 30 days.
On about Day 27, the platform asks the issuing bank to terminate the $5,000 authorization and institute a $4,000 authorization.
When the $4,000 authorization takes effect, the platform informs the merchants system that its time to capture another $1,000.
"This process continues until its paid off," Fassberg said. "What you, as a consumer, see on your regular Visa or MasterCard bill is Sams TV Store, Installment One of Five. "
If the consumer pays the credit card bill in full, theres no interest.
Its a simple story, and PayItSimple is seeking ISOs and agents to tell it to their clients and prospects.
"We have some, and were looking for many more," Fassberg said of ISOs.
Many ISOs will find the service exactly the sort of value-added offering that can help them start conversations with potential accounts or provide a reason to approach established accounts and firm up the relationship.
PayItSimples consumer research indicates the installment plan will inspire loyalty to merchants that offer it. The service doesnt push shoppers to buy goods and services they cant afford, Fassberg said, suggesting that instead it helps them manage their credit.
Company researchers also found that merchants believe the no-interest deferred payments would not only foster loyalty but also increase their sales.
The service could also become a profit center for ISOs, Fassberg noted. PayItSimple will redirect a portion of what the merchant pays it to the acquirer that secured the account, she said. The company does not charge upfront fees.
Installation occurs within a few days, either through embedded code or an API, and it works at the point of sale or online, Fassberg said. The software works with "tons and tons" of gateways, she added.
When merchants use the service they take on no more risk than with ordinary credit card transactions because the authorization process does not change, Fassberg said.
The company received patents for the service in 2012, and turned the technology into a product in 2013 before introducing it this year, she noted.