How does the No Cost EMI works?

This financing option allows customers to buy high-value items through interest-free instalments, making products more accessible without the burden of paying the full amount upfront. But what exactly is no-cost EMI, and how does it work? Let’s understand the mechanics of this important financial tool that businesses now use to improve their conversion rates.

What is No-cost EMI?

No-Cost EMI (Equated Monthly Instalment) is a financing option that enables buyers to divide the cost of a product into equal monthly payments without incurring any additional interest charges. Essentially, this means consumers can purchase items like electronic appliances and mobile phones now and pay for them over time without paying more than the actual price of the product. This financing model is often referred to as ‘No Cost EMI’ or ‘Interest-Free EMI’, highlighting its key benefit of allowing consumers to spread out their payments without incurring extra costs.

You must be wondering how it then benefits the lenders to offer such a scheme. Let us explain:

The workings of No-Cost EMI

A no-cost EMI lets customers turn big-ticket purchases into manageable monthly payments without any additional interest. They can enable recurring transactions through payment gateways or other online payment options. Imagine helping your customers buy that shiny new smartphone or a sleek refrigerator, but their wallets protest. Enter No-Cost EMI, the financial superhero that saves the day by spreading the cost over several months, making it feel as light as air on your budget.

For instance, let’s say your customer is coveting a high-end laptop priced at INR 50,000. With a traditional EMI, one would have to pay back not only the laptop cost but also the interest. However, with a no-cost EMI, they simply pay the INR 50,000 divided equally over, say, 12 months with no sneaky interest charges, no extra fees, just pure purchasing power.

But how does this magical offer work? Retailers often collaborate with banks and financial institutions to provide this option. They might include the interest cost in the product’s selling price or get a subsidy from the manufacturer. So while it seems like your customer is getting an unbeatable deal (and they kind of are! ), the interest cost is usually covered elsewhere.

How No-Cost EMI Helps Businesses?

With its obvious benefits for consumers, including improving the affordability of products and accessibility, no-cost EMI also assists businesses in improving their ARR.

• Boosts sales : By reducing the immediate financial burden on consumers, businesses can attract more customers who might otherwise hesitate to make a purchase. This financing option can be particularly effective during festive seasons and sales events when consumers are more inclined to spend.
• Increases customer loyalty : When consumers experience the ease and convenience of buying with a no-cost EMI, they are more likely to return for future purchases. This positive buying experience fosters a sense of trust and satisfaction, leading to repeat business and long-term customer relationships.
• Encourages higher spending : With the financial flexibility that no-cost EMI provides, customers are often encouraged to spend more than they originally planned. Instead of opting for lower-priced items, they might upgrade to higher-end products or add more items to their cart, knowing they can pay over time without additional costs. This can lead to an increase in the average transaction value.
• Competitive Edge : In a competitive market, offering a no-cost EMI can set a business apart from its rivals. Consumers are more likely to choose a retailer that provides flexible payment options over one that does not. By integrating no-cost EMI, businesses can attract a broader customer base, including those who prefer financing options over upfront payments.
• Reduces cart abandonment : One of the common reasons for cart abandonment in e-commerce is the high upfront cost. By offering no-cost EMI, businesses can mitigate this issue. Knowing they can pay in installments without extra charges can encourage customers to complete their purchases, reducing the rate of cart abandonment and increasing overall sales conversion. A variety of different methods can be utilised to enable recurring payments, such as POS terminals, payment gateways, and other online payment methods.

No-cost EMI is a win-win for both consumers and businesses. It makes high-value purchases more accessible and affordable for consumers, improving their cash flow management and ensuring cost-effective financing. In today’s consumer-driven market, offering no-cost EMI is a strategic move that can drive growth and success for retailers and service providers alike. Enable No-Cost EMI with Worldline now, schedule a demo