Designing EMI Payments
Equated Monthly Instalments (EMI) has been a popular mode of repaying loans in India for a while. Over the years, consumers have taken to the EMI mode of purchasing expensive products such as Houses, Cars, Large Appliances, and Mobiles. This has increased the affordability for many Indian consumers.
This article discusses the thoughtful design decisions with which we have enabled EMI payments in Flipkart.
👁 Making customers aware
The first step was making customers aware that they can now purchase products on Flipkart with EMI. We ensured having these callouts while merchandising the products across the funnel, and as it was an important decision maker for products like mobile phones and large appliances, we showed it after every product in the browse page (list of products).
More details surfaced on the product details page, where we helped them understand them more about the type of EMIs and plans.
💡 From Offline to Online
In a brick and mortar store, there’s always a person involved who tells you the details of the EMI such as:
- Price of the product
- Percentage rate of interest and interest charged
- Tenures available (usually ranging from 3 months to 24 months)
- Down payment if any, and the EMI (the amount to be paid every month)
It was important to explain the same information to online customers.
Customers are apprehensive about online payments. We put a new section in our Payments list page for EMIs and called it EMI (Easy Instalments) so that it also explains the proposition to users.
Once the customers selected the option, they could select their instrument to continue with the purchase. An instrument could be a card from a bank, or a non-banking financial corporation (NBFC). These instruments were divided into ones that provide a No Cost EMI on this transaction, and ones that don’t. But since customers always look for No Cost EMI plans first, we can put more emphasis on them. Customers choose the plan based on what they can afford every month.
🍄 Leveling-up
From our data, we saw a very high EMI intent for orders over ₹5,000. For such orders, we did a one-up on our previous design to help customers with saved cards on Flipkart. We designed a flow where the customer can choose a saved card, and then choose to pay the full amount or pay with EMIs. This highlights the EMI option among other choice of payment options on the page.
💸 Rise of No Cost EMI
There’s a popular myth that No Cost EMI means no interest. The Reserve Bank of India doesn’t allow banks to tender interest-free loans.
Brands enable No Cost EMIs usually on the subvention model. Look it up. If the customer can pay some down-payment, it allows businesses to offer products on No cost EMI. We offer discount equivalent to the interest calculated on the transaction.
The interest on the transaction is computed and that amount is then given as a discount to the customer. Explaining this was a tricky ask — especially with multiple products being charged at different rates of interest.
No Cost EMI involves two different transactions
- Making the down payment
- Signing up for the EMI
That means 2 different agreements between the customer and the bank, usually calling for 2 one-time passwords. Customers would’ve hated that experience! For ‘No Cost EMI’ purchases on Flipkart, the banks authenticate both these transactions with just one OTP making it simple for the transacting parties — Flipkart, Bank, Payment Gateway, Customer. 😇
Yet…we still understand the challenges in explaining No Cost EMIs to customers and will be focussing on this problem.
☂️ A Bigger Umbrella
Buying things on EMI, although very popular, wasn’t always easy. One needed to have a credit card to buy products with EMIs. Having a credit card meant that banks have checked your credit score and hence granted you credit. Most Indian customers do not have a credit card, but usually have a debit card from their bank.
For Debit Card users, Flipkart partnered with some major banks and launched debit card EMIs or pre-approved EMIs. Now, we see these new customers buying on Flipkart on credit — without a credit card!
There’s still lots to be done in this space. The focus will be on helping customers be comfortable with paying online — upfront payments as well as planned payments.
