Instalments allow consumers to pay for a purchase in parts. An instalment typically covers one purchase/order and multiple payments over time.
Instalments differ from a recurring payment because in recurring payments it is not a single purchase, but an ongoing service like bills or subscriptions. In an instalment transaction, a single transaction is sent to the issuer, which in turn splits the total amount into several monthly payments.
There are two instalment types:
issuer-funded (credit instalments)
merchant-funded (regular instalments).
Issuer-funded (credit instalments)
The bank issuing the card to the consumer offers the instalments to the consumer
The bank charges the consumer's account in the agreed number of instalments and charges an interest
The merchant receives the total purchase amount at once
The issuer takes the risk
The merchant and consumer agree on the number of instalments, free of interest fees
The bank charges the consumer's account according to the instalment plan between the consumer and merchant
Merchants receive payments as the bank charges the consumer's account
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