What is Point Of Sale (Checkout) Consumer Financing
The Internet is changing consumer habits at a rapid pace, and this means that retailers are scrambling to adapt accordingly. One of the main areas where retailers can adapt to compete is in point of sale financing. Another is how consumers can pay for their purchases.
In the past, purchases were limited to cash or through a credit card. This meant consumers needed to have existing bank accounts to purchase something. Today, cashless transactions and modified Buy Now Pay Later options are commonplace. This is because they are fast but also they are reliable.
Point of sale Financing: What is it?
Point of sale finance is the process of utilizing an instant loan that allows buyers to spread the cost of the purchase for a period from as short as 3 months up to 60 months, usually for zero interest. This means that customers can apply for consumer financing at the moment of purchase. They can choose to link use one lender or search through several lenders that are partnered with the retailer. Once they choose the lender, the application is accepted, and contract signed the merchant is notified to dispatch the goods. The lender then ‘pays the retailer and it assumes any future interaction regarding payments with the buyer.
There are various service providers that offer consumer finance solutions to integrate with.
As of writing this article, the industry leader in terms of technology, integration and multi-lender portfolio is chargeafter.com
Why the Rise in Popularity?
Point of sale financing offers specific advantages both for retailers and consumers. For retailers, this is a more flexible method of payment which can help increase their conversion, especially for big-ticket purchases. In cases like these, buyers aiming to make big-ticket purchases may have a hard time getting approval from traditional lenders. Perhaps they may not have enough credit on their cards. POS financing, makes their purchase affordable. With POS financing, customers choose from a variety of lenders that offer rates best suited for their purchase and affordability.
Yes, these payment schemes are laid out as clear payment plans, where buyers can select the terms of the loans they want and the terms for the periodic payments that follow. Clear and certain payment terms, without any of the hidden fees that typically come with credit and traditional loans, set POS financing apart from traditional payment schemes.
POS financing can also be integrated seamlessly into any online store or website so that consumers can apply for instant loans without having to leave the online store. This adds a layer of ease and security that helps ease the mind of buyers. Adapting to POS financing also is not limited to the retailer’s financing capability. Small businesses can work with third-party POS financing platforms so they can offer this option to consumers.
POS financing offers equally rewarding advantages for buyers. For one, this type of financing allows them to make purchases without the limitations posed by credit cards and cash transactions. Aside from flexibility, POS transactions are also transparent. A secure, digital trail allows them to track purchases which is useful when managing finances. This feature can be attractive to Millenials who want the freedom to spend but also want to be more disciplined in sticking to their budget.
Should your business offer POS financing?
According to Forbes.com, it should. POS or shopping cart financing helps increase the buyer’s buying power, widens their reach in terms of goods that they can pay for, and gives them more time to pay for purchases. Consumers are more likely to spend more with merchants that have this system in place because purchases are easier.
Having a POS system in place increases a store’s average order value by up to 75%, without a decrease in margins. In another article published by mytotalretail.com, a Klarna survey showed that instant financing may reduce cart abandonment. The same survey showed that 75% of consumers preferred merchants that offered instant financing, and that 28% would change to merchants that use instant financing, over other merchants that do not.
POS financing is a win-win for both retailers and the people they serve. And studies have shown that this is one factor that can likely influence consumer behavior to increase more purchases and even affect their choice of retailers. With this level of positive sentiment directed at instant financing, retailers have everything to gain if they start offering POS financing to consumers today.
Other Interesting Articles & Links
forbs.com article: Should Your Business Offer Point-Of-Sale Financing?