Why a pay-over-time option can help your business attract more of today’s travelers
As the travel landscape changes, businesses that offer travelers more flexible payment options, such as the ability to pay over time, will gain an advantage.
A pay-over-time option is not simply a new way to check out. It’s also a tool to help acquire more customers by catering to their preferences, which can be directly influenced by economic and generational shifts.
An analysis of over 20 of our travel merchants in 2018 showed Affirm to be a powerful tool for boosting sales metrics. They saw on average a 90% increase in average order value, a 5% increase in conversion, and an 80% increase in booking window length after implementing Affirm. Shoppers who bought with Affirm at these businesses also had 14% and 21% repeat purchase rates at six and 12 months, respectively.
Below are three ways these shifts are affecting travelers, and how a pay-over-time option like Affirm can give travel businesses a lift.
1. Gig economy alters income streams
As technology more easily connects employees and employers, unconventional career paths are becoming much more popular. Entrepreneurs turn to freelancing to give them freedom of schedule and location, while other startups like Airbnb, Uber, Lyft, Postmates, Esty, and TaskRabbit have transformed from side hustles to main income streams.
Those incomes, however, are not as stable or predictable as in past generations. And traditional payment tools and credit options are bad at evaluating and assisting the needs of these modern workers and consumers. Many travelers, for example, do not rely on credit cards. According to an Affirm study of 1024 people, 55% use cash or debit to pay for vacations, and 57% have been unable to book a vacation due to the cost.
Affirm’s pay-over-time option allows consumers to select the repayment terms that work for their income schedules and budgets. They get the benefits of a credit card without the worry of falling into the hole of compounding interest and late fees.
Affirm customer Tracey is a perfect example of this consumer profile. She’s a home-school teacher, and her husband is a seasonal construction worker. They make good money but don’t get paychecks every two weeks. During stretches of time with a steady income flow, she may select a three-month term when buying with Affirm. If the couple is in between gigs, she will select a longer payment option to relieve some of the financial burden.
“It’s hard to stay on top of things when your job is always up in the air, but that's why we love Affirm,” she said. “I loved the payment option since it’s perfect for our lifestyle. It’s hard to get credit when your employment history is all over the map, literally.”
2. Changing spending habits lean toward monthly payments
Items that used to be one-time purchases, like music, movies, or even clothes, have moved to a subscription model. Spotify, Birchbox, Netflix, StitchFix, Fabfitfub, DollarShaveClub, and even Urban Outfitters have made subscriptions the norm for 21st century shoppers. These consumers are more comfortable with monthly payments, and many don’t mind adding a similar charge for vacation or travel expenses.
Businesses that partner with Affirm can benefit from this monthly payment model, as it already fits with consumers’ expectations and financial habits.
3. Young consumers use financial products differently
Millennials use banks, savings accounts, and other financial tools differently than previous generations. Convenient mobile banking and banks without physical branches, such as Ally, are popular with younger generations.
Millennials regularly use Venmo or Square Cash to split the bill with friends or collect rent on their phones. Forty-seven percent of millennials use mobile banking, double the rate of Baby Boomers.
While the banking industry has been slow to adapt to the new ways consumers are using their products, Affirm is a mobile-first product with the payment flexibility options millennials expect built-in from the start. Our travel partner CheapAir saw Affirm as critical to its customers.
“The way we looked at it, is this something that is going to be helpful for people?” said Gregory Samson, VP, Marketing and Business Development at CheapAir. “Will it make it easier to shop with us, and make us a more appealing option for a segment of customers?”
The answer was clearly yes for Samson. CheapAir saw 52% of its checkouts with Affirm completed on mobile.
The bottom line is that travel companies need to catch up to the rest of the world in terms of payment options, especially if they want to attract modern consumers. According to the Affirm study mentioned above, 67% of respondents would be more likely to take a trip if they could pay over time. Your business may be missing out on these crucial customers, and the fix is simple.
To learn more about implementing Affirm on your travel site please contact sales.