Instalments

Installments allow consumers to pay for a purchase in parts. An installment typically covers one purchase/order and multiple payments over time.

Installments differ from recurring payments because unlike recurring payments it is not a single purchase, but an ongoing service like bills or subscriptions. In an installment transaction, a single transaction is sent to the issuer, which in turn splits the total amount into several monthly payments.

Installment Types

There are two installment types:

• issuer-funded (credit installments)

• merchant-funded (regular installments).

Issuer-funded (credit instalments)

• The bank issuing the card to the consumer offers the installments to the consumer

• The bank charges the consumer's account in the agreed number of installments and charges an interest

• The merchant receives the total purchase amount at once

• The issuer takes the risk

Merchant-funded

• The merchant and consumer agree on the number of installments, free of interest fees

• The bank charges the consumer's account according to the installment plan between the consumer and the merchant

• Merchants receive payments as the bank charges the consumer's account

• The merchant takes the risk