In today's competitive commerce environment, offering flexible payment options can significantly enhance a company's ability to attract and retain customers. Two popular methods are Klarna's "Pay in 3" service and in-house monthly payment plans. While both options aim to make purchases more affordable by spreading out payments, they differ in execution, benefits, and potential drawbacks.
Klarna Pay in 3
How It Works: Klarna, a third-party payment provider, offers a "Pay in 3" option where the total purchase amount is divided into three equal installments. The first payment is made at the point of sale, with the remaining two payments automatically deducted every 30 days.
How to enable it: Follow our guide here
Advantages:
Instant Payment: Klarna manages the payments from the customer. Even though the payments are spread over three months, Klarna pays the full amount (less fees), directly to your Stripe account. This means you offer Klarna as a payment right up until you close entries (even if closing entries happens less than 3 months before the event date)
Customer Trust: Klarna is a well-known brand, which can increase customer confidence in the payment process.
Risk Management: Klarna assumes the risk of non-payment, ensuring the retailer receives full payment regardless of whether the customer defaults.
Disadvantages:
Fees: Klarna charges a greater fee than regular card processing. This is approx 4.99% + 20p*
Your rates may differ depending on your country of origin and agreement with Stripe
Control: There is slightly less control over the payment process and customer data, as Klarna handles these aspects. Klarna may not always approve someone to use their payment method.
In-House Monthly Payment Plans (Subscriptions)
How It Works: A retailer creates and manages its own monthly payment plan, where customers agree to pay for a product in installments directly to the company over a set period.
Advantages:
Lower Processing Fees: In-house monthly payment plans use regular card processing fees. This means they offer a cost saving over Klarna
Customisability: Unlike Klarna, in-house monthly payment plans can be customised to accept a different number of payments rather than just 3 which Klarna enforces. You could offer a range of between 2 - 8 for example. This therefore allows participants to break high-value events/items down further into small monthly payments.
It’s worth keeping in mind, that whilst a higher number of installments will lower the cost, it does increase the chances of a card expiring during the period of time the system is collecting money.
Customer Relationships: Managing payments in-house allows retailers to maintain direct contact with customers, fostering stronger relationships and customer loyalty.
Excluded Items: It is possible to exclude items from payment plans. For example, if you offer an event with a t-shirt you may want to exclude the t-shirt from monthly payment plans so that it has to be paid in the first installment. Another example maybe that a participant enters 2 different events at the same time and you only want them to be able to spread the cost of one of those events.
Disadvantages:
Risk of Non-Payment: Unlike Klarna, money is received to your Stripe account after each monthly payment. If a customer were to cancel their credit/debit card then there is a risk that they will not enter new card details to continue the monthly payments. Eventrac has built-in logic to notify the customer and request they enter new card details (or any other action that maybe required to progress the payment). Should the worst happen and the customer fails to complete payment, these will be shown to organisers who can then take further action, such as removing them from the race.
Time Limited: Due to the nature of monthly payment plans, customers can only opt to use the payment plan if there is at least the minimum number of months you specify that people can spread the cost of their payment over. For example, if the minimum number of installments is 2 months, if someone were to enter 1.5 months before the closing date, they would be unable to pay in installments because there isn't enough time to collect the money before event day.