Offering smart payment solutions helps the merchant increase both the number of products sold and the size of the shopping cart

The Rapid Growth of Smart Payment Solutions in Estonia

"The strong growth figures from last year confirm that payment solutions, which have been popular globally for some time, have now been widely adopted in Estonia as well and are increasingly used to spread out expenses. Last year, the use of 'buy now, pay later' solutions grew more than threefold, and a study conducted by Inbank and Kantar Emor revealed that every third Estonian resident used some form of consumer credit or installment plan," said Andrus Salusoo, Head of Inbank's Estonian business unit.

According to Salusoo, this means that offering such payment options helps merchants increase the accessibility of their products and services, which in turn raises both the number of products sold and the value of the shopping basket.

Payment Habits Vary by Sector and Customer Base

Kuldar Kullasepp, Head of Sales and Marketing at Maksekeskus, explained that the share of purchases made through bank payments, credit cards, or 'pay later' solutions varies greatly and depends largely on the merchant’s business sector and customer base. "Since 'pay later' solutions are primarily used in segments with higher basket values, such as leisure, accessories, clothing, furniture, and electronics, their share can range from 5% to 15%, or even higher for some merchants," Kullasepp pointed out.

10% of Purchases Made via 'Buy Now, Pay Later' Solutions

According to Maksekeskus statistics, on average, every tenth consumer uses a 'buy now, pay later' solution when making a purchase. The significant growth in payment solutions has mainly occurred in so-called universal categories, that is, stores and e-shops that sell a wide range of products across different categories, where the average basket size is higher.

"Furniture stores also stand out, where purchase amounts can reach several thousand euros, making it difficult for customers to pay the full amount at once. It’s primarily about convenience, but psychologically, it is also easier for the consumer to make a purchase decision when they don't have to pay the full amount upfront. Compared to traditional installment plans, 'pay later' solutions have the advantage of no additional costs or interest for the consumer, for example, for a 600-euro purchase, you pay 200 euros per month over three months," Salusoo explained, adding that today it’s possible to make purchases with smart payment solutions in almost every major store.

Kullasepp emphasized that merchants should weigh two aspects: firstly, the costs associated with different payment methods, and secondly, consumer expectations. "The latter is where 'buy now, pay later' offers merchants significant added value because it helps increase customers’ willingness to buy by giving them the opportunity to complete a purchase they might otherwise abandon. Additionally, payment solutions can motivate customers to buy higher-quality and more expensive products or to add more items to their shopping cart," he added.

Will New Smart Payment Solutions Replace Traditional Installment Plans?

Nevertheless, Kullasepp noted that 'buy now, pay later' solutions are more expensive for merchants than, for example, bank payments. "This may be one reason why not all stores offer this solution today. It's important to understand that 'pay later' solutions don't compete with bank payments because their users are typically those who wouldn't have made a purchase otherwise. Therefore, offering 'pay later' options doesn't make existing sales more expensive for merchants; instead, it creates new sales opportunities, making the offer of payment solutions profitable," Kullasepp explained.

Both Inbank and Maksekeskus representatives emphasized that despite the rapid growth of 'buy now, pay later,' traditional installment plans are not disappearing from the market. These services are evolving in line with consumer habits and remain important for financing larger purchases. "Both solutions have their place- installment plans are suitable for longer repayment periods, while 'buy now, pay later' solutions offer short-term flexibility," Salusoo added.