Making old ideas new again for a digital age

A few old ideas are being modernized and revitalized. Among them are installment loans, subscription services, and a close cousin of subscription services known as continuity programs. Part of what’s new about them—and relevant to this blog—is that while such programs were once driven by checks via U.S. Mail, today they are utterly dependent on digital payments.

Installment loans get a new suit of clothes

There’s nothing new, for instance, about installment loans. In fact, “It goes all the way back to the Great Depression and layaway plans,” wrote Fiserv’s Mark Hennin, SVP of Lending and Global Business Solutions, and Brad Goad, VP of Global Digital Commerce. But …

… retailers now are teaming up with Fintechs to enhance digital engagement by allowing consumers to acquire merchandise now and pay for it later. Those installment programs, such as through QuadPay, enable customers to send equal payments over a set period at no interest or additional cost to the buyer.

Although installment payments have found their home in retail, many nontraditional merchants—travel, health care, government and utilities—are adopting the programs to deliver flexibility and convenience. So whether consumers are paying for a car registration, medication or tickets to a sporting event, installment payments are making it easier to acquire goods and services.

In the old days, an installment loan required a customer’s active application. Now, it’s more passive on the customer’s part, with AI payment systems offering installment options at retail and digital points-of-sale. recently reported that …

… Visa Installments uses Visa application programming interfaces (APIs) and a network of enablers to streamline issuer and seller integration at the seller’s digital POS. Visa Installments turns already approved issuer credit lines into installment payment options at the digital checkout for Visa cardholders.

Subscriptions, too, are making a refurbished comeback.

Subscriptions aren’t new, either. For that matter, neither is refurbishing them. The earliest subscription model applied to periodicals delivered to your mailbox or, in the case of daily newspapers, by paperboys—many of whom were girls—and some of whom were reputed to have the uncanny ability to lob a paper into the only puddle in an otherwise bone-dry driveway.

The concept was later adapted to continuity programs like Columbia Record Club and Book of the Month Club. Each month by mail, members received an “official” selection. They could keep and pay for it, or return it within 30 days and pay nothing. Inertia serves continuity programs well: subscribers often keep and pay for items simply because they don’t get around to returning them. Other kinds of retail products soon capitalized on the idea, such as Seeds of Month, Stamp of the Month, and Panty of the Month.

In our digital age, subscription has even broader application. You can, for instance, “subscribe” to Microsoft Office, Adobe Creative Suite, and Quickbooks instead of purchasing their software outright. You can subscribe to meals via the likes of Freshly and Blue Apron.

The current pandemic has given new life to subscription programs—of which digital payments are in integral part. Another report states that the subscription model is seen …

… in a whole new light by allowing consumers to get steady supplies of their favorite goods and services direct to their homes without braving store aisles only to find limited inventory. Certain segments of the market have surged, with millions of new subscribers for movie and TV streaming platforms, meal kits and other product boxes.

But then, in other ways the pandemic may be working against subscriptions:

The subscription economy is not immune to the wider economic headwinds, however. Many consumers are wary about their finances, and some feel they are already juggling too many subscriptions. In the current climate, it is more important than ever for subscription businesses to offer flexible plan features — and this includes the ability to temporarily “pause” accounts.

Comic wrinkles

As with any burgeoning field, a few wrinkles remain to be ironed out. Sometimes they can be a bit comic. When a personal acquaintance’s reward points didn’t quite cover his recent online purchase, Visa’s AI immediately offered to let him divide the remainder into four, interest-free monthly payments. He appreciated the gesture, he told me, but in the end he declined Visa’s kind offer, opting instead to bite the bullet and cough up the entire $1.04 balance in one lump sum. “Sometimes,” he said, “I guess, the I in AI isn’t all that I.”

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