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How to offer customers split payments

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The GoCardless content team comprises a group of subject-matter experts in multiple fields from across GoCardless. The authors and reviewers work in the sales, marketing, legal, and finance departments. All have in-depth knowledge and experience in various aspects of payment scheme technology and the operating rules applicable to each. The team holds expertise in the well-established payment schemes such as UK Direct Debit, the European SEPA scheme, and the US ACH scheme, as well as in schemes operating in Scandinavia, Australia, and New Zealand. See full bio

Last editedMar 20233 min read

Merchants taking higher-value transactions are likely to benefit from being able to offer their customers split payments. This can be done through buy-now-pay-later (BNPL) services such as Klarna. Alternatively, merchants can manage their own split payments, generally with the help of services such as GoCardless.

Benefits of split payments

The headline benefit of split payments is that they make it easier for customers to pay, by breaking down large purchases into smaller amounts to be made in instalments. Some products or services can simply be too expensive for your customers to buy outright at times. By offering a payment splitting option, it can both make it easier for you to close sales and let your customers access the product without delay.

Without the option of making payment by instalments, a significant number of customers will either:

abandon the cart
postpone the purchase
choose lower-priced alternatives
buy fewer products

When you offer instalment payments, you remove a potential pain point for customers who are working with a limited budget.

Split payments can also be used in the context of overdue payments and debts, when a repayment plan may be the best option. Offering late payers flexibility can at times be more effective than repeated requests for payment.

Drawbacks of split payments

There are two potential drawbacks to offering an instalment payment. In reality, these are more likely to be theoretical than practical.

The first potential drawback is that offering split payments may delay your payment. Technically this is true, as you receive the total revenue later than otherwise. However, split payments allow you to make sales and income that you would have otherwise missed.

The second potential drawback is the need to manage the split payments. However, this is generally a minor issue. If you sign up for a BNPL service such as Klarna, just follow your provider’s onboarding process. After that, your service provider takes care of the logistics.

Even if you opt to manage the process yourself, it is still very straightforward. For example, the GoCardless dashboard is designed to be easy to use. GoCardless can also be integrated with partner software (for example, Xero). Many accounting packages also have the facility to manage split payments

Even if merchants opt to manage the process themselves, it can still be very straightforward. For example, the GoCardless dashboard is designed to be easy to use. GoCardless can also be integrated with 350+ software partners, including Xero and QuickBooks.

How to collect Direct Debit payments with GoCardless

1.

Create your free GoCardless account, access your user-friendly payments dashboard & connect your accounting software (if you use one).

2.

Easily set up & schedule Direct Debit payments via payment pages on your website checkout or secure payment links.

3.

From now on you'll get paid on time, every time, as GoCardless automatically collects payment on the scheduled date. Simple.

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Split payments and the law

In general, any firm offering any form of consumer credit must be FCA-authorised. It is, however, possible to offer split payments without FCA authorisation provided that you meet the relevant criteria. The key points to note are:

The agreement must be for a maximum of 12 instalments over a maximum of 12 months
It must be for a specific purchase and cannot be a conditional sale, HP agreement, pawn agreement or relate to the purchase of land
It must be for a fixed amount
No interest or charges can be levied

The vast majority of merchants wanting to offer split payments will meet these criteria, however it is worth seeking specialist advice.

Why should your business be offering split payments?

Having a £25 charge on four consecutive monthly bank statements is often preferable to a single £100 charge. Offering split payments can increase your total sales by making your product more affordable.

Offering split payments through a BNPL service

The advantage of offering split payments through a BNPL service is that it offers maximum convenience. You just choose your provider, sign up and add their functionality to your checkout (online or real world). The BNPL service takes care of everything else for you.

You may also benefit from the BNPL provider’s brand recognition. This could be particularly useful for smaller ecommerce businesses looking to establish credibility and trust. If this is important to you, you may want to use a well-known solution. It will probably cost more than managing your split payments yourself though.

Offering split payments directly

Offering split payments directly can avoid your business incurring extra costs. It can be straightforward to do using a bank payments solution like GoCardless, which allows you to easily set up and edit recurring payment plans for your customers, as well as allowing you to receive the full amount in one go if the customer prefers.

We can help

GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. For any merchants offering a split payment option such as Buy Now Pay Later, GoCardless enables you to leverage account-to-account payments to collect instalments easily, flexibly, and worry-free.

Find out how GoCardless can help you with both one-off and recurring payments.