As digital payments evolve in India, Equated Monthly Instalments (EMIs) have become one of the most popular ways for customers to make purchases especially big-ticket items. From electronics to education services, furniture, healthcare, travel, and even clothing brands, EMI adoption has skyrocketed.

But EMIs aren’t just convenient for customers they’re a growth enabler for businesses too. If you run a business, offering EMI payments can increase conversions, improve cash flow, and unlock new customer segments.

This article breaks down what EMIs are, how they work, why businesses should offer them, and how to set them up along with important considerations.

What Are EMIs?

An EMI (Equated Monthly Instalment) is a structured repayment plan where a customer pays for a product or service over monthly instalments instead of paying the full amount upfront.

Types of EMIs

1. Credit Card EMI
   The bank converts a purchase into instalments either directly at checkout or later through the bank app.

2. Debit Card EMI
   Banks offer pre-approved limits based on transaction history and account balance patterns.

3. BNPL (Buy Now, Pay Later) EMI
   Fintech companies like Simpl, ZestMoney, Lazypay, and others offer short-term instalment plans.

4. Consumer Loan EMI
   Lenders give a standalone personal loan or merchant loan that customers use for a purchase.

Interest Rates & Tenures

• Interest may vary from 0% (merchant absorbs cost) to 24%+ depending on lender.

• Typical tenures range from 3 to 24 months, sometimes longer for high-value items.

How EMIs Work for Businesses

When a customer chooses EMI, the business gets the full payment upfront, while the customer repays the bank or lender over time.

There are two main models:

1. Merchant Subvention Model (Zero-Cost EMI)

• Customer pays no interest.

• Business pays the bank a “subvention fee” (usually 3%–12%).

• Great for increasing sales volume.

2. Customer-Borne Interest Model

• Customer pays interest directly to the bank/BNPL provider.

• Business incurs no cost.

• Useful for smaller merchants.

In both cases, the business receives funds immediately, making EMIs a risk-free cashflow tool.

Why Businesses Should Offer EMI Options

1. Higher Conversions

Many customers abandon purchases because the upfront cost seems too high. EMIs make the purchase psychologically and financially easier.

Businesses typically see:

• 20–40% increase in conversions for mid-range products

• Up to 70% increase for high-value categories (e.g., electronics, furniture, courses)

2. Larger Average Order Value (AOV)

When customers can pay monthly, they are more likely to:

• Upgrade to premium versions

• Add extra features

• Buy higher-value items
  Leading to a higher AOV.

3. Broader Customer Base

EMIs appeal to:

• Students

• Young professionals

• Customers with cashflow constraints

• People without credit cards (via debit EMI / BNPL)

This expands your market significantly.

4. Improved Cash Flow for the Business

Even though customers pay in instalments, the business receives full payment upfront from the bank or EMI partner.

This means:

• No waiting for monthly instalments

• No collection risk

• No EMI default risk on your balance sheet

5. Competitive Advantage

If a competitor offers EMI and you don’t, customers may choose them even for identical products.

Offering EMIs keeps your business relevant and competitive.

Should All Businesses Offer EMI?

EMIs are ideal if your product/service falls into at least one category:

• Price above ₹2,500

• One-time or high-value purchases

• Courses / training / education

• Real estate rentals / deposits

• Health & medical services

• Ecommerce stores

• Electronics, appliances, jewellery

• Subscription services

Even service-based businesses now offer EMIs because it improves accessibility.

If your business sells low-ticket FMCG items, EMIs may not be useful.

How to Set Up EMI Payments for Your Business

Setting up EMIs depends on the type of business and the payment provider you choose. Here's the process:

Step 1: Choose Your EMI Partners

Options include:

• Banks (HDFC, ICICI, SBI, Axis, Kotak)

• Payment gateways (Razorpay, PayU, Cashfree, Paytm)

• BNPL providers (Simpl, ZestMoney, Lazypay)

• POS machine EMI for offline stores

Most digital gateways integrate multiple banks and BNPL partners.

Step 2: Decide the EMI Types

Choose what to offer:

• Credit card EMI

• Debit card EMI

• No-cost (zero-cost) EMI

• Low-cost EMI

• BNPL EMI

Step 3: Define the Tenure Options

Typical tenures:

• 3, 6, 9, 12 months

• Up to 24 or 36 months for expensive goods

Step 4: Understand Fees

You may need to cover:

• Subvention fees (for no-cost EMI)

• MDR charges

• Settlement fees from the payment gateway

Step 5: Integrate EMI Options at Checkout

For online stores:

• Integrate with Shopify, WooCommerce, custom websites

• Payment gateways provide EMI plugin or API integration

For offline stores:

• Enable EMI on your POS terminal

• Train staff to explain EMI options to customers

Step 6: Marketing & Communication

Promote EMI clearly:

• On banners

• On product pages

• In-store posters

• Social media ads

• Checkout reminder

The clearer you communicate, the higher the conversion.

Risks & Considerations for Businesses

1. Subvention Costs

If offering zero-cost EMI, the merchant pays a percentage of the transaction.

2. Operational Integration

Ensure your payment gateway, accounting, and inventory management systems are aligned.

3. Customer Awareness

Many consumers do not understand EMI charges, interest, or processing fees. Clear communication reduces disputes.

4. Refund & Cancellation Policies

If a customer cancels an EMI order, banks charge reversal fees. Businesses must have a clear policy.

Additional Benefits & Opportunities

1. Boosting Brand Trust

Businesses offering EMI options appear more established and consumer-friendly.

2. Seasonal Sales Growth

During festivals, EMI offers significantly boost sales. Many brands tie up with banks for special offers.

3. Interest-Buyouts for Promotions

Brands sometimes absorb part of the interest to run zero-cost EMI campaigns. This works extremely well for new product launches.

4. Attracting Customers Without Credit Cards

Debit card EMI and BNPL EMIs open doors to millions of customers who traditionally could not access EMI benefits.

Conclusion

EMIs are no longer just a payment option: they are a strategic growth tool. They increase conversions, expand your customer base, boost average order value, and provide upfront cash flow while giving customers financial flexibility.

For most modern businesses; especially those selling tech, appliances, furniture, courses, or high-value services offering EMI options is not just beneficial, it is essential. With the rise of digital payments and BNPL platforms, enabling EMIs has become simpler, faster, and more cost-effective than ever.

Businesses that integrate EMI options today will be better positioned to attract, retain, and convert customers in an increasingly competitive marketplace.