Fintech has been booming for the past few years, with a major leaning toward payment installment plans through companies such as Klarna, Afterpay, Affirm, Quadpay, Sezzle, etc., who each have their own slightly different features and terms of service.
Klarna has taken a step in a new direction by introducing “Vibe,” which is its new loyalty rewards program. According to TechCrunch, when you use Klarna as your payment method (whether on a retailer’s website or through the Klarna app) you’ll receive points for every $1 spent. These points can be redeemed at a variety of retailers, many of which who do not currently work with Klarna.
I have been using payment installment services for the past few years and always tend to choose this path of purchase when buying anything that is over about $150. I do have a credit card and know that I could put the entire purchase on the credit card and then pay it off in as many small payments as I would like, but I choose not to, and I think that this speaks volumes about how Gen Z will be making purchases going forward.
I have grown up making purchases online via my laptop and always choose to pay that way. Applying this to retail, I have never liked talking to store associates and dreadfully fear that my card will get declined in a store for whatever reason, therefore, I choose to purchase online probably about 85% of the time. Paying online via these installment plans or even through Paypal is such a smooth process, and with all of the warnings I’ve been given about abusing a credit card and the history I’ve been taught about the cyclical boom and bust nature of credit cards, those services just seem friendlier.
For anyone that works an hourly job, paying for pricier items through installments just makes sense. For all of college, I made a couple hundred dollars a month working part-time on the weekends. From that money, some of it had to go to my various fixed monthly costs, i.e., car insurance, food, dog things, gas, etc. What was left of my paychecks was my pleasure money, and with the wildly expensive taste in almost everything I acquired at an unknown point in my life, one month of my pleasure money rarely would cover the expense of, say, a pair of shoes that I wanted, but it could cover the cost when broken into installments over a period of time that allowed me to pay a portion, wait for my next check, and pay another portion. I believe that there are millions of people out there who are in similar financial situations, and installment plans really do give you the freedom to buy things that are more expensive yet are still affordable for you than what you would usually buy because of having to pay up front. Installment plans help to change the narrative on how we view affordability, and these installment services provide more of a structure, in my opinion, than a credit card that you slowly pay off.
What’s great (for now) about Klarna’s loyalty program is that none of the other installment companies are doing this yet. They will surely follow suit, but it makes me, an average consumer who uses payment installments frequently, actually consider paying attention to which company I’m using when I sign up for these installments. I have never cared, because I am incredibly brand-oriented when it comes to clothing (my biggest purchases) and such, so I always just use whichever company is offered at the brand that I like. Knowing that I could be getting something back from a specific company (Klarna in this case), you bet I’m going to pay more attention.
Another point on why I think this will be successful for these companies is that I am assuming that consumers use these installment plans for big purchases, which means that they are going to be getting a lot of points that encourage them to come back for more. I’m curious to see how long it will take to accumulate the points for a free coffee at Starbucks through Klarna’s rewards compared to through Starbucks’ actual rewards.
Overall, I predict that there will be a major shift in mindset as to how we pay in the following years, especially with the generation coming into their spending power used to using online payments for their entire lives. To me, there’s something fascinating about how I think of banking and where my money is. I know that all of my money is in my bank account and I can access it through my cards and that I can move it around in my app, yet I still feel like I do the majority of my banking through Paypal, and these installment companies because it feels more natural. Biggest point here being that that means that my shopping is done almost entirely online. I’ll whip out Apple Payh wherever I can, but that’ss till not many places.
I love visual merchandising and flagship stores and I always look for stores to visit based on their appearances wherever I go, so I am hoping that someone will figure out how to implement this type of fintech into physical retail…
Featured image from TechCrunch