Author: ChargeAfter

Offering patients a seamless path to dental financing choices is a strategic must for dental providers in 2024. More patients than ever before are exploring financing options as demand for elective treatments rises. To meet this demand, dental providers must offer diverse financing solutions that cater to a broad spectrum of patient needs. With an embedded lending platform, you can easily provide your patients with seamless access to multiple lenders to offer the best dental financing for patients.

An embedding lending platform simplifies the financing process, enabling dental practices to offer multiple financing options. The platform integrates directly into a dental service’s existing systems, allowing patients to apply for dental financing options without leaving the dentist’s office, website, or call center. In doing so, dental providers can enhance customer loyalty by ensuring a favorable financing experience with approval rates of up to 85% for their patients.

Navigating dental financing: opportunities and pitfalls

Lenders categorize borrowers based on their credit scores. ‘Prime’ are those with excellent credit, ‘near-prime’ those with good but not perfect credit, and ‘subprime’ those with poor credit histories. To meet the needs of patients across this spectrum of credit, dental providers must incorporate multiple lenders into their financing offerings. This is a process fraught with challenges if handled independently, as:

1. Lender integrations are complex, time-consuming, and require significant resources.
2. Day-to-day management of each lender is complex and time-consuming. 
3. Dependency on single lenders becomes risky if terms change or if a financing provider ceases operations.
4. Patients may need to complete several applications before being approved, each with its own distinct set of requirements.
5. Staff must navigate and understand the systems of multiple lenders, each with its own processes.

The only way to counter such challenges is through a platform-first approach to point-of-sale financing. This will free dental practices up to focus on their core operations and patient care while providing an exceptional dental financing experience for their patients with higher approval rates and better conversion. 

Enhance dental financing with platform-first approach

Streamlining access to personalized financing solutions is a game changer. By providing patients with a flexible and choice-driven financing experience, dental practices can dramatically enhance the patients’ purchasing experience and deliver high approval rates. As a result, dental practices observe a notable rise in the average transaction value, leading to an overall boost in sales, stronger patient relationships, and a competitive edge in the healthcare marketplace. An embedded lending platform:

1. Facilitates a seamless connection between dental practices, multiple lenders, and patients covering the entire credit spectrum on a single platform.
2. Simplifies the application process and enhances the patient’s experience wherever they are receiving service: in-clinic, through a call center, or online. 
3. Results in high approval rates of up to 85% that in turn boost conversions.
4. Manages all financing activities efficiently, from a single application to instant approvals to post-sale management including disputes, reconciliations, and customized reporting.
5. Provides data and analytics to optimize the financing offer and create personalized relationships with patients.

Integrating an embedded lending platform into the patient care journey is the most effective way to meet these needs, providing a seamless financing experience for patients and clinics. Dental practices that integrate an embedded lending platform significantly improve the patient experience. Patients enjoy quicker service, with immediate access to a range of dental financing options tailored to their individual needs and financial situations, all without the need for multiple applications. This hassle-free approach to dental financing helps patients feel more at ease and valued, fostering a sense of loyalty and satisfaction with their dental care provider.

Why ChargeAfter is the platform of choice for dental practices

ChargeAfter’s embedded lending platform enables dental practices to seamlessly integrate financing into the patient journey, whether online, in clinics, or via call centers. The platform connects dental practices with a network of lenders that cater to a full range of patient credit profiles. Lenders on the platform offer a diverse range of financing products, including installment plans and revolving credit, to cater to various patient needs and preferences.

By simply filling out a quick application, patients are matched with the best financing options through a waterfall financing approach, where if a patient isn’t approved by the first lender due to their credit score, their application automatically ‘falls’ to the next lender in line until the best match is found. This process ensures that patients receive tailored dental financing solutions within seconds based on their individual credit needs and preferences. It is easy for dental practices to manage, supporting the entire financing process in a single platform enabling quick and easy refunds, reconciliations, dispute management, reporting, and lender optimization. 

In 2024, personalizing patient financing will become not just an option but a necessity for dental practices aiming to distinguish themselves in a competitive landscape. As we navigate through a year of innovation and patient-centered care, offering tailored dental financing solutions will emerge as a key strategy to make patients smile wider than ever before.

References: Article in groupdentistrynow.com

Payments MAGnified 2024 by Merchant Advisory Groups (MAG) will take place from 20 Feb to 23 Feb 2024 at the Hyatt Regency Dallas. TX (USA)

If you are prioritizing enhancing your POS financing in 2024 and are heading to Payments MAGnified on February 21nd & 22nd – we would love to meet!

As the industry-leading embedded lending platform for point-of-sale financing, we can help you simplify the financing journey for you and your customers. Our easy-to-use platform and network of lenders deliver up to 85% approval rates making for happier customers and more sales.

Come and meet the team to learn how ChargeAfter can help you unlock the full potential of POS financing. You can find us at Booth 216 or schedule a meeting.

Payments MAGnified 2024 will delve deeper into the technology of payments, connecting merchant IT professionals and their business partners with technology sponsors through technology-focused educational sessions and engaging networking events. The MAG Tech Forum, aligned with the bi-annual MAG conference, is designed explicitly for payment IT professionals. It provides education and networking opportunities focused on innovative uses of new relevant payment technologies.

This event for professionals and businesses in the financial payments industry, offers networking opportunities and customizable experiences catered to business- and tech-minded individuals. Payments MAGnified is dedicated to exploring the depths of industry challenges and opportunities, focusing on new advances in payment technologies, consumer financing, and embedded financing, and other topics.

In 2024, sales channel strategies need to be diverse and optimized to suit the purchasing behaviors of the modern shopper. In this article, we explore sales channel strategies in more detail and share 3 benefits of a sales channel strategy that integrates waterfall consumer financing. 

What is waterfall financing?

Waterfall financing, from a consumer financing perspective, is a method of consumer lending at the point of sale whereby a shopper loan or credit application passes through a series of lender tiers prioritized for receiving the best loan interest and terms to lower-tiered lenders offering the next best loan offer.

Here’s how it typically works:

1. First Tier Criteria: Initially, an application is evaluated against the strictest criteria. These criteria include a high credit score, low debt-to-income ratio, or other financial stability and creditworthiness indicators. Most applicants who meet these criteria are considered low-risk borrowers.
2. Subsequent Tiers: Applications not meeting the first tier’s stringent requirements are passed down to the next tier. Each successive tier has slightly more relaxed standards than the one before it. For instance, the second tier might accept lower credit scores or higher debt-to-income ratios.
3. Approval or Decline: This process continues until either the application is approved under one of the tiers’ criteria or fails to meet all tiers’ standards and is ultimately declined.

What is a sales channel strategy?

A sales channel strategy refers to the marketing tactics used across several sales channels. In the modern eCommerce landscape, a single sales channel is simply not enough. Online stores should utilize a variety of channels, from social media platforms to Google Shopping and beyond, to attract new customers and retain existing shoppers. A sales channel strategy considers how best to engage consumers through online marketplaces, modern marketplaces, wholesale selling, retail selling, and paid advertising. Using a combination of platforms within these avenues will lead to greater sales channel success. 

Waterfall financing from ChargeAfter will also support your sales channel strategy by empowering your customers’ purchases. By partnering with ChargeAfter, you can offer your customers access to a wide network of lenders capable of facilitating their shopping needs across your entire sales channel strategy. Let’s take a closer look at the benefits of a sales channel strategy that integrates waterfall consumer financing. 

Benefits of waterfall financing

Benefits for shoppers

Waterfall financing makes shopping more accessible than ever. Merchants that use waterfall financing give their shoppers access to lenders who can finance their shopping decisions. Customers can receive this financing without having to undergo credit checks, making consumer financing a feasible choice for shoppers unwilling to turn to their financial institution for support. This, coupled with favorable repayment plans makes for an efficient shopping experience that appeals to new and existing customers. 

1. Increased access to credit: Waterfall financing allows individuals who might not meet the strictest lending criteria to access credit still. This benefits those with lower credit scores or less conventional credit histories.
2. Opportunities to build or repair credit: For borrowers looking to build or repair their credit, gaining access to credit through less stringent tiers can provide this opportunity as long as they manage their debt responsibly.
3. Tailored financial products: Since waterfall financing involves different tiers with varying criteria, consumers might find products more tailored to their financial situation rather than a one-size-fits-all approach.

Benefits for lenders

1. Market expansion: This approach allows lenders to serve a broader range of customers. They can cater to prime borrowers in the upper tiers while offering products to near-prime or subprime borrowers in lower tiers, thus expanding their market reach.
2. Improved loan performance: Using more detailed criteria to assess borrowers, lenders can better predict loan performance and reduce default rates. Each tier can be optimized based on the risk profile and past performance of borrowers in that category.
3. Flexibility and responsiveness: Waterfall financing provides a framework for lenders to quickly adjust their lending criteria in response to changing market conditions, regulatory environments, or shifts in their risk appetite.
4. Data-driven decisions: This approach often relies on comprehensive data analysis, allowing lenders to make more informed and precise decisions based on various variables beyond just credit scores.

Industry benefits:

1. Financial inclusion: By providing credit opportunities to those whom traditional criteria might exclude, waterfall financing contributes to financial inclusion efforts.
2. Innovation in lending: This approach encourages innovation in the lending industry as lenders develop more sophisticated models to assess borrower risk across different tiers.

In summary, waterfall financing offers a more nuanced and flexible approach to lending that can benefit a wide range of consumers, especially those who might be underserved by traditional models, while also allowing lenders to manage risk and expand their customer base.

Originally published: 12 Jan 2022
Updated: 24 Jan 2024

The contemporary financial landscape has significantly shifted towards consumer financing, driven by technology, evolving consumer behavior, and changing economic conditions. Point-of-sale (POS) financing allows consumers to purchase goods and services, especially big-ticket items, by accessing loans embedded into the customer journey. It presents an alternative to traditional financing methods like credit cards, debit cards, and cash. This rise is facilitated by embedded lending platforms like ChargeAfter, which have revolutionized the retail space by enabling businesses to offer diverse lending options to their customers.

Consumer financing products are diverse and tailored to meet the various needs of customers. These financial tools range from Revolving Credit Line and Long-Term Installment Loans to Buy Now Pay Later (BNPL), each designed to facilitate purchasing, provide flexibility in payment, or support specific financial goals. Understanding these products and finding the right fit can be essential in retaining customers and increasing sales. You can read more about the different consumer financing products available and explore the various options for POS Financing Products for retailers here.

Let’s delve into five major factors contributing to this upward trend.

1. Rising Consumer Demand Amid Inflation and Rising Interest Rates

ChargeAfter data shows that applications for POS financing significantly increased in Q1 2023 compared to the same period in 2022. This trend looks set to continue, as shoppers seek flexibility in a time of escalating prices and rising interest rates. Consumer financing is predominantly prevalent for high-priced goods and services like furniture, electronics, jewelry, home improvements, and wellness offerings. However, inflation has also driven shoppers to apply for financing for lower-cost items. This trend directly results from consumers’ necessity to maintain their purchasing power amid adverse economic conditions.

2. Aversion to Credit Card Debt Among Millennials

The fallout from the financial crisis of the early 2000s profoundly impacted Millennials, who are now more aware of the pitfalls of credit card debt than previous generations. This awareness has led to a growing interest in alternative financing options.
A recent nationwide survey by the Federal Reserve Bank of New York revealed that concerns over ongoing price inflation are causing consumers to feel increasingly pessimistic about credit access. The perception of obtaining credit is declining, with 58% of respondents stating that it’s either much or somewhat more challenging to access than just a year prior. This issue is particularly prevalent among the younger population, as 57% of millennials have reported facing challenges related to their credit scores when trying to acquire financial products.

The aversion to high-interest rates coupled with the demand for favorable payment terms has paved the way for consumer financing to become a mainstay. The prospect of predetermined monthly payments and a clear payoff date makes this option attractive, enabling consumers to manage their debt effectively without burdening traditional credit card debt.

3. Efficiency and Integration of Contemporary Checkout Financing

The modern iteration of financing has brought significant improvements in efficiency and integration. For instance, financing has been seamlessly incorporated into the checkout process, much like well-known options such as Apple Pay, Visa Checkout, and Google Pay. This integration has successfully eliminated additional steps, thus removing potential barriers to conversion. About 25% of purchases are made through consumer financing at checkout for mid to high-ticket items. The simplicity of the application process, coupled with quick financing options, enhances customer satisfaction and leads to faster checkouts.

4. Diversity of Lending Options Increases Approval Rates

Consumer financing takes many forms, providing a greater likelihood of approval for most shoppers. Those with excellent credit may opt for higher payments at a lower interest rate for a shorter repayment period. On the other hand, someone with less-than-perfect credit may prefer more flexible terms. This flexibility is made possible due to the variety of lenders available, ranging from traditional institutions to lease-to-own offers. This diverse lender network can offer approval rates as high as 85%. Access to appropriate offers at the time of purchase significantly boosts the chances of transaction completion, leading to higher customer satisfaction.

5. The Role of E-commerce and In-Store Financing

The proliferation of e-commerce has had a profound impact on the growth of consumer financing. The ability to offer flexible payment terms online dramatically enhances the customer’s shopping experience, improving conversion rates and customer loyalty. Likewise, in-store financing allows physical retail locations to provide the same flexible terms and omnichannel experience, bridging the gap between the online and offline retail experience.

The Future of Consumer Financing

The rapid growth and acceptance of consumer financing, both in-store and online, are reshaping the retail landscape. By leveraging these financing options, businesses can meet the diverse financial needs of their customers, thereby enhancing the overall customer experience and fostering long-term loyalty. Consumer financing is not merely a trend but a powerful tool that’s here to stay in the evolving world of retail.

About Mark Denman
Mark has worked in the near-prime and tertiary lending space for 30 years. As EVP of Merchants Sales & Success at ChargeAfter, he is responsible for ensuring merchants and lenders get the best care possible.

The retail industry has successfully navigated a period of uncertainty in recent years. Retailers have improved every step of the customer journey by plugging into technology to respond to challenges such as the COVID-19 pandemic and supply chain disruptions. Shoppers today enjoy a better, more personalized customer experience than ever before. We can buy goods and services online or offline, choose to have our purchases delivered in two hours or two days, buy “off the shelf” or customize our purchases – whatever suits us best.

However, during this era of inflation and high interest rates, retailers have a new struggle: providing choice and personalization in consumer financing.

The Evolving Landscape of Consumer Financing

For most of the last half-century, credit cards have been the primary solution for purchase financing. Analysis by McKinsey states that credit cards remain the most popular unsecured borrowing in the United States. Credit card borrowing accounts for 78% of balances, with a 10% growth in transaction volumes in recent years, contributing to transaction values of $49 trillion in 2021.

However, the credit card is beginning to slow as a legacy solution. Traditionally, the credit industry has worked around, rather than with, the increasing segmentation of borrower profiles. Significantly, this limitation is manifesting in the form of a demographic gap. Research commissioned by GlobalData revealed a marked rise in the percentage of under 35s not possessing a credit card — 47% in 2022, compared to 39% in 2016.

Instead, younger and underserved shoppers are adopting point-of-sale loans embedded in the customer journey as an alternative to credit cards. These demographics enthusiastically embraced Buy Now Pay Later (BNPL) as an attractive alternative for consumer financing. BNPL offers convenience through competitive APR rates, predictable repayment schedules, and flexible approval requirements. However, it has its limitations. Originating from the fintech industry, new regulations by the Consumer Financial Protection Bureau threaten BNPL providers as loan defaults grow.

Additionally, this type of loan is only suitable for small-ticket items. Shoppers need an alternative to finance big-ticket purchases such as furniture, electronics, home improvement, jewellery, etc. And while plenty of other lending products are available for these purchases, retailers struggle to offer their shoppers a choice of financing options at the point of sale.

The Challenges of Existing Embedded Lending Frameworks

Embedded lending is experiencing rapid growth, with market revenue reaching US$4.7 billion in 2021 and projected to rise by US$32.5 billion in the next decade. However, given the complexity of embedding multiple lenders into omnichannel customer journeys, currently, most retailers offer a single-lender solution.

This single-lender model limits retailers’ ability to provide financing options that cater to their customers’ needs and preferences. Lenders typically specialize in specific financing products, such as installments, 0% APR, BNPL, lease-to-own, etc., targeting specific customer segments – prime, near-prime, or subprime. This limited financing focus leads to poor approval rates, abandoned carts, lost sales, and customer dissatisfaction. Furthermore, relying on a single lender exposes retailers to the risk of changing lending conditions, especially as lenders tighten their underwriting strategies and approve lower approval rates and transaction values.

Retailers know this, and many attempt to integrate a second lender into their offer. However, this approach results in a heavy lift for the retailer and a poor and fragmented experience for the customer.

However, this is changing. The technology enabling retailers to embed multiple lenders into omnichannel customer journeys is now available.

An increasing number of retailers are embracing a platform-first approach to point-of-sale financing.

Unlocking the Potential of Embedded Lending in Customer Journeys

Given the difficulties in managing multiple lenders, retailers are adopting a platform-first approach quickly. ChargeAfter’s embedded lending platform enables retailers to easily configure a waterfall of lending options that address all credit profiles from credit-invisible to super-prime and everything in between into omnichannel customer journeys.

This model benefits all of the players in the ecosystem. Retailers offer flexible financing options to customers at their moment of need, resulting in up to 85% approval rates, increased sales, higher average order value (AOV), and improved customer satisfaction and loyalty. Shoppers access financing choices from trusted lenders, enabling them to purchase the goods and services they desire with the terms and conditions that best suit their needs and preferences. Lenders, in turn, gain direct access to customers needing their services. This comprehensive solution creates a win-win-win situation for the entire consumer financing ecosystem.

About Kevin Lawrence

Kevin has worked in the banking and finance industry for over a decade. He has worked closely with some of North America’s largest banks and financial institutions and retailers. Kevin is an expert in embedded consumer financing, with a deep understanding of current trends and where the industry is heading.

In the dynamic world of retail, Point-of-Sale (POS) financing, a type of embedded lending, is proving to be a game-changer. Its rapid growth mirrors shifting consumer needs and reflects the changing landscape of the retail industry. According to Future Market Insights (FMI), the embedded lending market, including POS financing, will exceed $32.5 billion by 2023 due to the rapid adoption rate of fintech solutions.

Traditional credit card usage is significantly slowing as younger consumers seek more flexible and accessible alternatives. Unlike the conventional one-size-fits-all approach of credit cards, POS financing platforms offer tailored solutions that cater to the unique needs of different customer segments. The result? A shift towards more versatile financing methods, particularly among younger and underserved shoppers.

Embedded finance solutions come in various forms, each with its unique benefits. From revolving lines of credit that offer a set borrowing limit that businesses can repeatedly tap into to the allure of 0% APR programs that promise zero interest for an introductory period, these POS financing options are as diverse as they are flexible.

Furthermore, Buy Now Pay Later (BNPL) programs have emerged as a popular short-term installment solution. Offering an easy-to-understand structure, BNPL allows consumers to purchase goods immediately and pay for them over time, making the entire process hassle-free. Similarly, the lease-to-own concept has found favor, particularly for subprime borrowers seeking to purchase high-priced items such as appliances, furniture, and electronics.

Types of Retailers Using POS Financing

Retailers in many verticals are adopting POS financing and making it a strategic priority given its flexibility and conveniences. As inflation continues to impact customers, demand for POS financing is rising. According to ChargeAfter data, demand for point-of-sale financing increased by 55% in the first quarter of 2023, compared to the same period in 2022. Retailers benefit from offering a robust POS financing experience that meets the needs of all of their customers, especially those selling big-ticket goods or services that are purchased infrequently. In 2023 retailers that are prioritizing upgrading their POS financing offers include:

E-commerce Stores

Online retailers often use POS financing as it can easily be integrated into their checkout process. This allows consumers to choose a financing option at the point of purchase. However, it’s important for many retailers to offer an omnichannel financing experience. 

Electronics Stores

Given the high price of many electronic items such as televisions, laptops, and smartphones, electronics retailers often offer POS financing to make these purchases more affordable for consumers. Customers need to be able to access financing both in-store and online, depending on how they prefer to shop. Additionally, as many electronic retailers serve businesses, they also need to consider B2B financing in their POS offer.

Furniture Stores

Similar to electronics retailers, furniture stores often sell high-ticket items that can be out of reach to many. POS financing can help increase sales and average order value by making these items more accessible to consumers. Retailers need to consider offering an omnichannel financing experience including pre-approval online before visiting a store. They also benefit from offering financing options that cover a range of customers according to different credit scores. 

Home Improvement Stores

Stores that sell appliances or home improvement goods like hardware and construction materials often use POS financing. These items can range in price and financing allows consumers to make these necessary purchases more manageable.

Healthcare Providers

Healthcare and beauty business provide elective surgeries and other costly procedures. They make their treatments accessible to more people when they offer POS financing. By offering POS financing, healthcare providers democratize services that were previously out of reach to many. 

Automotive Dealerships

Dealerships often use POS financing when selling and repairing cars. They may offer financing options, from traditional auto loans to lease-to-own options.

Jewelry Stores

Given the high price of jewelry, these retailers often offer POS financing to make purchases more feasible for consumers.

Types of POS Financing Products

By offering different types of financing products at the point of sale, retailers  meet the needs of more customers.

Revolving Credit Line

A revolving line of credit is a flexible loan arrangement between a financial institution and a customer that establishes a maximum loan balance that the lender permits the borrower. It allows the borrower to use funds up to a set limit and repay them, potentially over and over again. Unlike a traditional loan, where the borrower receives a lump sum upfront and starts paying it back in installments, a revolving line of credit lets the borrower withdraw funds up to the set limit as needed. Interest is charged only on the borrowed amount, not the entire credit limit. Once the borrower repays any portion of the borrowed amount, that portion becomes available again for future use. This “revolving” structure gives the borrower the flexibility to manage their borrowing and repayment schedules within the agreed terms. A typical example of a revolving line of credit is a credit card, where the cardholder can spend up to a specific limit, repay the balance, and then spend again.

Long-Term Installment Loans

Long-term installment loans are loans that borrowers repay over a set number of scheduled payments or installments over an extended period. Depending on the loan agreement, this period can range from several months to several years. Long-term installment loans can be secured or unsecured. Secured loans require collateral, such as a house or a car, and typically have lower interest rates because the lender can seize the collateral if the borrower defaults. Unsecured loans, which are provided at the point of sale, do not require collateral but usually have higher interest rates to compensate for the increased risk to the lender.

The terms of long-term installment loans, including the loan amount, interest rate, and repayment schedule, are typically determined at the outset and spelled out in the loan agreement. Each installment payment reduces the principal amount owed and covers the interest on the debt, making these loans easier to budget for than revolving credit lines, where the minimum payment can vary. Long-term installment loans are often used for major purchases or investments, such as buying a house (mortgage), buying a car (auto loan), or funding higher education (student loan). They provide borrowers with the means to afford big-ticket items and significant expenses they couldn’t cover upfront, spreading the cost over an extended period.

0% APR

0% Annual Percentage Rate (APR) refers to a promotional interest rate offered by lenders where no interest is charged on the principal amount for a specified period. This period can range from a few months to a few years, depending on the terms set by the lender. Often seen in credit cards or auto financing, this offer allows borrowers to finance purchases or transfer balances from high-interest accounts without accruing additional interest during the promotional period.

It’s important to note, however, that once the promotional period ends, any remaining balance starts to accrue interest at the regular rate as defined in the terms of the agreement. Moreover, 0% APR offers usually require the borrower to have good to excellent credit, and the terms may stipulate that if a payment is missed or late, the promotional rate ends prematurely, and a higher interest rate applies. It’s, therefore, crucial to understand the terms and conditions attached to a 0% APR offer before proceeding.

Buy Now Pay Later (BNPL)

BNPL, or Buy Now, Pay Later, is a type of short-term installment financing that allows consumers to purchase goods or services immediately and pay for them over time. Typically, payments are made in fixed installments over a set period, such as weeks or months. One of the main attractions of BNPL for consumers is that, in many cases, these payment plans do not incur high interest or fees, provided payments are made on time. Some BNPL services offer 0% interest financing if the balance is paid within a specified promotional period. This can make BNPL more affordable than traditional credit cards for some consumers, particularly for more expensive purchases.

Consumers need to understand the terms of their BNPL agreement. Late fees may apply if payments are not made on time, and interest may be charged on the remaining balance. In some cases, if the balance is not paid off by the end of the promotional period, interest may be charged retroactively from the purchase date.

BNPL has seen a surge in popularity in recent years, particularly among younger consumers, and is now offered by a wide range of online and physical retailers. Typically BNPL is used for small-ticket items with a value of between $50 and $1000 (Consumer Financial Protection Bureau). Based on five surveyed lenders from 2019 to 2021, BNPL loans grew by 970%, from 16.8 to 180 million. The dollar volume grew by 109%, from $2 billion to $24.2 billion.(Consumer Financial Protection Bureau). 

Lease To Own

“Lease to own”, also known as “rent to own”, is a type of agreement that allows a customer to lease a product with the option to purchase it at the end of the lease term. This financing option is typically used for expensive furniture, appliances, vehicles, and electronics for subprime customers. The customer makes regular payments over a specified period in a lease-to-own agreement. These payments contribute toward the total purchase price of the product. At the end of the lease term, the customer can buy the item for either a small residual amount or the sum of the remaining unpaid purchase price.

The advantage of a lease-to-own agreement for customers is that it allows them to use and enjoy an item immediately without paying the total purchase price upfront. It can benefit those who cannot afford high-cost items or do not qualify for traditional financing. However, it’s worth noting that the total cost paid over the lease term can be higher than the item’s original price due to the inclusion of interest and fees. Therefore, customers should carefully review the terms of a lease-to-own agreement before proceeding.

B2B Financing

B2B POS Financing (point-of-sale financing), is allows businesses to finance purchases at the point of sale, the same way consumers do. This type of financing is often used for purchases of larger quantities of goods or services since businesses typically purchase in bulk to meet operational needs, inventory requirements, or to fulfill contracts with their own customers.  Most merchants provide their own b2b financing, usually with offers with 30, 60, or 90-day payback.  These terms are not favorable for many businesses, especially SMBs, and new providers are coming into the market offering business loans with expanded terms. These new POS financing options offer immediate approval (or denial) of credit at the point of sale, making the purchasing process quicker and smoother and resulting in higher approval rates. The buyer can repay the amount over time per the terms of the financing agreement, which can be up to 12 months, giving businesses greater flexibility. B2B POS financing can benefit both the buyer and the seller. For the buyer, it provides immediate access to needed goods or services without a significant upfront investment. For the seller, it can facilitate significant sales, increase cash flow, and foster stronger customer relationships.

Challenges of Single-Lender POS Financing

While the benefits of POS financing are manifold, relying on a single lender can be limiting. Single-lender solutions can lead to lower approval rates and a poor customer journey. Declined shoppers start the POS financing process again, resulting in cart abandonment, and affecting sales and customer loyalty. There is also the risk of being subject to the changing lending conditions of a single financial institution.

Why Retailers Must Start With Embedded POS Financing Platforms First

Many retailers are turning towards embedded finance platforms that offer many lending options through a single gateway to counter these challenges. With an embedded lending network, retailers can manage multiple financing options like BNPL, installment loans, and lease-to-own, providing an omnichannel financing experience.

Indeed, research by ChargeAfter suggests that 66% of retailers prioritize implementing a consumer financing platform that manages the entire financing cycle, including reconciliations, chargebacks, and dispute resolution.

An embedded finance platform also removes the burden of managing complex requirements from the retailers, facilitating seamless management of waterfall financing, in which applications are automatically sent to lenders in a sequence until approval is obtained.

Merchants are thus looking for point-of-sale financing platforms that offer white-label consumer financing solutions and BNPL white-label options, giving them control over the customer experience while handling the complexity of lending and compliance in the background.

Conclusion

As retailers adapt to the evolving needs of their customers, it’s clear that the future lies in leveraging robust POS financing platforms. Offering an omnichannel lending experience through an embedded lending platform can significantly enhance the shopping experience, increase approval rates, and boost sales, making it a win-win for consumers and retailers.

Through white-label POS systems and a waterfall finance approach, retailers offer consumers the flexibility they desire and a better experience.

Retailers that adapt to these changes and invest in POS financing solutions today will undoubtedly be better positioned to cater

To the needs of the next-generation consumer, we are leading the way in the ever-evolving world of retail.

With embedded financing becoming increasingly popular, it’s time to embrace this trend and reap the benefits of enhanced customer satisfaction and increased sales. After all, in retail, customer experience is king – and an omnichannel financing experience through a robust POS financing platform is a significant step in that direction.