Author: ChargeAfter

As we enter the second half of 2023, economic uncertainty shows no signs of abating. Big-ticket items, like furniture, continue to be out of reach for many shoppers. This is exacerbated by lenders adjusting their underwriting strategies and approving fewer point-of-sale (POS) financing applications. Despite this challenging environment, furniture retailers can conquer declining financing approval rates and keep their customers happy. We explore how.    

Why Declining Approval Rates Continue to Matter

The current economic landscape, marked by rising inflation and increasing Merchant Discount Rates (MDRs), puts considerable financial strain on consumers. It leads to increased APRs, lower credit limits, and reduced purchasing power. At the same time,  individual lenders are approving fewer applications. This makes it harder for consumers to secure financing for their purchases.

Declining approval rates are likely to continue. Lenders are driven by risk management considerations. They tend to tighten their risk models and underwriting strategies in market instability. This cautious approach aims to protect lenders’ assets and minimize potential losses. As a result, lenders may approve fewer loans, making it harder for borrowers to get credit.

Additionally, regulatory measures play a crucial role in shaping lending practices. Regulators aim to protect consumers from over-borrowing and ensure transparency. They may introduce stricter guidelines and oversight for lenders. This regulatory environment often leads to a more conservative lending landscape. The result is decreasing approval rates, particularly for riskier loan products or borrowers.

How Declining Approval Rates Impact Furniture Buyers 

The decline in consumer finance approvals has clear consequences for retailers. It results in fewer sales and has a negative impact on the customer experience. Meanwhile, there is a shift occurring in shoppers’ credit profiles making the situation more complicated.

Consumers who were once approved by prime lenders at the start of 2022, now only qualify for near-prime loans; near-prime consumers are now subprime borrowers, making POS financing inaccessible for most of an already underserved population for POS financing. A survey by ChargeAfter found that only 17% of retailers offer subprime options.

Another audience to consider is B2B. Many furniture retailers are expanding to serve business clients. This way they tap into new market segments and diversify their revenue streams. Yet, point-of-sale financing for businesses often has approval rates below 15%.

The shift from a single-lender model to a multi-lender solution increases access to best-fit financing.

The Benefits of a Multi-Lender Approach

A multi-lender approach provides shoppers with financing choices. Lenders specialize in lending products usually designed for a specific credit profile. POS financing that meets the needs of the credit spectrum boosts the most important KPIs.

For example, retailers that use ChargeAfter’s platform to manage their POS financing enjoy up to 85% approval rates. ChargeAfter’s data shows that demand for POS financing increased by 62% in Q1 2023 compared to the same period the previous year, while approval rates for retailers using ChargeAfter went up by 14% despite lenders adjusting their credit boxes.

With approval rates from individual lenders fluctuating, adopting a multi-lender configuration is a critical strategy to ensure customers have consistent access to necessary funds in order to maintain and even increase approval rates.

How to Maximize Customer POS Financing Approval

In an unpredictable retail environment, maximizing customer point-of-sale financing approvals is vital. This is why retailers plan to expand their portfolio of lenders in 2023, according to a survey by ChargeAfter. 

Merchants who try to stitch multiple lenders into omnichannel checkouts run into problems. The process involves complex integrations that can take months to implement. When implemented, retailers then face the complicated challenge of managing multiple systems. This approach provides a poor customer experience, since customers who are declined by one lender have to restart the process or abandon their carts, in a moment of the customer journey when speed and convenience are crucial. A streamlined, efficient application process improves sales conversion and customer satisfaction.

Retailers are simplifying the financing process with a platform-first approach, which is becoming more popular as new technologies emerge.

ChargeAfter: The Platform-First Approach to Point-of-Sale Financing

Point-of-sale (POS) financing has rapidly become a critical aspect of the customer experience, impacting approval rates, average order value (AOV), and customer loyalty. ChargeAfter’s platform-first approach to POS financing provides a robust solution.

With ChargeAfter’s platform, retailers easily embed POS financing into omnichannel purchasing journeys. This connects their customers to a network of over 40 trusted lenders that cover the full credit spectrum using a waterfall approach. The platform introduces a more seamless and efficient process for customer financing, enabling merchants to seamlessly provide a wider choice of financing options.

A vital benefit of a platform-first approach is higher approval rates. More approved applications mean more completed sales, contributing directly to retailers’ revenue growth. Furniture retailers using ChargeAfter’s waterfall platform increased AOV  by 22% in the first quarter of the year in 2022 versus the same period in 2022, suggesting that consumers are turning towards financing to buy big-ticket purchases as prices rise.

A platform-first approach enhances the customer experience, offering a seamless and inclusive financing process. Shoppers enjoy less hassle, more flexibility, and financial empowerment, resulting in a more positive shopping experience and improving customer loyalty. It also provides access to data and analytics on customer financing behaviors. This enhances the understanding of customer preferences, trend(s) identification, and strategy fine-tuning. 

Jerome’s Furniture, a family-owned chain of discount furniture stores in Southern California, improved its financing offer with platform first approach. Since implementing ChargeAfter, the company has seen a 67% surge in financing adoption with consistently high approval rates. The strategy has been so successful that Jerome’s Furniture leverages its financing offer in its marketing campaigns. 

Investing in consumer education around alternative financing solutions could also prove beneficial. Customers will feel empowered and better equipped to navigate the financing landscape as they become more informed, increasing their purchasing confidence. Ultimately, a combination of innovative financial partnerships, consumer-centric policies, and education may bridge the gap between customer desire and purchase reality in these challenging times.

Moreover, a multi-lender platform simplifies retailers’ operational load. It makes it easy to manage disputes and chargebacks, and ensures compliance. ChargeAfter manages the complete post-sale financing cycle leaving merchants to focus on their core business.

In this economic climate, providing a choice of financing offers isn’t a service upgrade—it is a necessity. An exceptional embedded lending experience ensures the stability and longevity of retail businesses and safeguards consumer purchasing power. A multi-lender point-of-sale strategy has become essential for weathering economic uncertainty.

Conclusion

The platform-first approach to POS financing is a multifaceted solution helping retailers to optimize their financing processes. By employing a multi-lender platform like ChargeAfter, merchants can enhance their POS financing approval rates, AOV, and customer loyalty, while offering an unparalleled shopping experience.

 

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With the advent of more sophisticated consumer financing technologies and services, consumers have more options to pay for goods and services, resulting in new spending trends. 

While credit cards are still a primary method of unsecured borrowing for US consumers, their use is declining, especially with the millennials and Gen-Z. Young Americans are also less likely to use cash; data from the Federal Reserve reveals that 35 to 44-year-olds only pay for 13% of their purchases in cash. 

According to McKinsey, the decline in credit card use has partly been attributed to the rise of buy now pay later (BNPL), which has been adopted by 37% of Gen-Z. As interest rates and prices rise, consumer financing at the point of sale rises. In the first quarter of 2023, ChargeAfter saw a 55% increase in point-of-sale (POS) financing applications. 

This article explores how consumers are shifting their payment habits and what this means for merchants.

Cash 

Since the early 2000s, there has been a global shift towards a cashless society, especially with the rise of mobile and crypto wallets. The US lags behind countries like the UK, Norway, China, and Canada in digital adoption. According to data from the Federal Reserve, 20% of transactions in the US are still made in cash. It’s worth noting that the average cash transaction is $22 compared to $112 for credit cards, indicating that it is primarily used for small transactions. In 2022, Pew Research reported that 41% of Americans said they make no purchases with cash in a typical week, compared to 24% in 2015.

** PEW Research Centre

Credit Cards

Research by GlobalData in 2022 indicates 47% of Americans under 35 do not possess a credit card, compared to 39% in 2016. Overall, credit cards remain popular and accounted for 40% of US purchases in 2021, according to Statistica. In July 2023, the Federal Reserve published that 20% of US loans were rejected, suggesting that higher interest rates make it more difficult for Americans to borrow. The Fed raised interest rates seven times in 2022, and the average credit card interest rate in the US is almost 25%. For shoppers with a low credit score, the average APR is around 27%, meaning shoppers are looking for an alternative. 

POS Financing

As the technology to underwrite at the point of sale has been developed, multiple POS financing products have become available, mainly driven by fintech companies. These lenders offer diverse loans, including 0% APR, long and short-term instalments, revolving credit, B2B financing, lease-to-own, and BNPL. According to a survey by LendingTree, POS financing services rose by 12% in the United States between 2022 and 2023 and are popular across all age groups. This form of consumer financing allows customers to obtain instant financing at their moment of need, often providing better terms and greater flexibility than a credit card. Data from ChargeAfter shows that the amount shoppers spent using financing increased by 53% in the first quarter of 2023 compared to 2022 in the US.

The Future of Consumer Financing

The trend towards point-of-sale financing will continue as younger generations reject credit cards and consumers face high-interest rates. As financial technology continues to evolve, the potential of consumer financing is fast growing, suggesting an increasingly integrated and versatile financial landscape.

While cash is straightforward and carries no debt, it lacks the security and reward benefits of credit cards and is quickly replaced with tech-centered payment solutions. Credit cards offer flexibility but can lead to high-interest debt and are unpopular with young people. Consumer finance delivered through a POS financing platform that supports multiple lenders and is embedded into omnichannel customer journeys is fast being adopted by retailers to give their customers financing choices anywhere they shop. 

References

https://moneytransfers.com/news/2023/02/03/cash-vs-credit-card-spending-statistics

https://fortunly.com/statistics/cash-versus-credit-card-spending-statistics/ 

Over 20% Of U.S. Loans Rejected In Last Year—Hitting 5-Year High (forbes.com)

https://20831387.fs1.hubspotusercontent-na1.net/hubfs/20831387/e-books/The_High_Cost_Of_Low_Approval_Rates%20(6)%20(1).pdf 

https://moneyzine.com/personal-finance-resources/cash-vs-credit-card-spending-statistics/ 

https://www.pewresearch.org/short-reads/2022/10/05/more-americans-are-joining-the-cashless-economy/

Jerome’s Furniture: A Legacy of Quality and Growth:

Established in 1954 by Jim Navarra, Jerome’s Furniture has built a legacy of delivering exceptional quality furniture for over six decades. What began as a single storefront has now expanded into a chain of 25 stores spread across California, catering to a vast customer base. Jerome’s Furniture has also embraced the digital age with a thriving e-commerce website, allowing customers to shop conveniently online.

 

Jerome’s success with ChargeAfter:

Recognizing the importance of providing flexible financing options to their customers, Jerome’s Furniture forged a partnership with ChargeAfter and integrated ChargeAfter’s consumer financing platform. This collaboration was a turning point in the furniture retailer’s financing strategy, significantly increasing customer financing adoption.

Since implementing the new financing strategy, Jerome’s Furniture has witnessed a remarkable 67% surge in customer financing adoption. This surge means many customers now use the store’s flexible payment options. Even during challenging times marked by inflation and market uncertainty in 2022 and 2023, approval rates have remained consistently high. This accomplishment reflects Jerome’s Furniture’s commitment to providing financial access to its customers, empowering them to bring home quality furniture without unnecessary financial burdens.

The success achieved by Jerome’s Furniture provides valuable insights into the impact of consumer financing on retail businesses. By embracing ChargeAfter’s platform, the furniture retailer has expanded its customer base, enhanced customer satisfaction, and ultimately drive business growth. The case study showcases how a strategic partnership and a customer-centric approach can lead to exceptional results.

Jerome’s Furniture’s partnership with ChargeAfter’s consumer financing platform has undoubtedly been a game-changer for the company.

The case study provides an overview of their success, highlighting the significance of consumer financing in the retail industry.

 

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If you want to learn more about how Jerome’s Furniture achieved a 67% increase in consumer financing adoption while maintaining high approval rates. We invite you to download the complete case study. Gain valuable insights and unlock new possibilities to help your business thrive in the ever-changing retail landscape.

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In today’s ever-evolving retail landscape, businesses must stay ahead of the curve and understand the importance of consumer financing. However, many retailers face low financing approval rates and hence miss out on the opportunities to attract new customers, improve their experience with the brand and build loyalty, ultimately leading to lost revenue. This is where ChargeAfter‘s latest ebook, ‘The High Cost of Low Financing Approval Rates,’ comes in.

The ebook covers various topics relevant to the current retail landscape, including the consumer demand outlook in 2023-2024 and opportunities to gain through consumer financing in 2023. It also dives into BNPL adopters, different types of point-of-sale financing, and the benefits of embedding consumer lending at the point-of-sale.

The ebook provides valuable insights into the different types of point-of-sale financing available, helping businesses make informed decisions about which options to offer their customers.

Another important topic covered in the ebook is the platform-first approach to financing. This approach can support retailers continuously seeking methods to meet the changing customer demands and increase satisfaction.

As there are many complexities involved in integrating and managing multiple lenders and financing options at the point of sale, both in-store and online, there is a growing demand for a seamless and easy-to-use platform for customers and retailers that easily embeds consumer financing at the point-of-sale, empowering retailers to create a better user experience and ultimately increase customer satisfaction and loyalty.

In conclusion, ‘The High Cost of Low Financing Approval Rates’ is a must-read for any business looking to stay competitive in today’s retail landscape. With valuable insights and practical tips, the ebook provides a comprehensive guide to understanding and implementing consumer financing at the point-of-sale. Don’t miss out on the opportunity to increase your revenue and customer satisfaction – download the ebook today!

Download ‘The High Cost of Low Financing Approval Rates’ ebook by ChargeAfter to learn more about consumer financing and how it can benefit your business.

 

The buy now, pay later option has become a widely favored payment method within consumer financing, with over 50% of US consumers utilizing these services through various consumer finance platforms.

What is buy now, pay later (BNPL)?

Buy now, pay later (BNPL) is an innovative payment option that enables customers to acquire products and services without paying the total upfront. Instead, they can instantly finance their purchases and repay them through fixed, interest-free installments over a set period—for instance, a $100 purchase in four equal installments of $25.

Widely used by a diverse range of businesses, particularly e-commerce retailers, BNPL services help boost conversion rates, increase average order values, and attract new customers. Companies that have integrated BNPL services have experienced up to a 30% incremental rise in sales volume. This payment alternative grants customers the convenience of immediate financing for their purchases paid through predetermined installments.

As a merchant, you receive the complete payment for the item upfront, excluding any merchant fees, and are not responsible for handling the financing. Buy now, pay later providers undertake the responsibility of underwriting customers, managing installment plans, and collecting payments, allowing you to concentrate on expanding your business.

This guide provides an overview of buy now, pay later payment, and other financing options. It will educate you on their functionality and assist you in selecting a provider.

How do buy-now-pay-later services work?

1. Customers can use BNPL to purchase products or services online or in-store by selecting the BNPL option via an app.
2. Once a plan is selected, approval from the BNPL platform is obtained, initiating the payment cycle. The first payment is deducted at checkout, while the remaining installments are typically interest-free. Extra costs may be incurred for late payments.

Businesses obtain the entire payment upfront (excluding any merchant  fees) upon completing the transaction at checkout. Customers make their installments directly to the buy now, pay later provider, often without interest and with no extra fees, provided they pay on time.

Do buy-now-pay-later  payment methods affect a customer’s FICO score (Credit Score)?

What Is FICO Score?

A FICO score is the number used to determine someone’s creditworthiness. Financial institutions and lenders use this as a guide to determine how much credit they can offer a borrower and at what interest rate. FICO scores can range from 300 to 850. The higher the number, the better. A FICO score is based on a few different factors:

When customers exercise caution by avoiding overspending and consistently making timely payments, the majority of buy now, pay later payment options should not substantially affect their credit scores.

How buy-now-pay-later services make money?

Different FinTechs monetize their BNPL platform in different ways. Generally, providers derive income from the merchant, customer, or both. The fees for merchants vary depending on the provider but typically encompass an initial setup fee and a fixed charge for each transaction. Customer fees usually involve late fees incurred due to missed payments.

What are the benefits of buy-now-pay-later services?

Seamless checkout experiences are crucial for any business, especially when targeting e-commerce expansion. Customers anticipate smooth, personalized payment experiences that allow them the freedom to select their preferred payment method. Buy now, pay later payment options provide adaptability and ease to your customers, minimize fraud, and enhance conversion rates and average order values.

As the cost of living increases, customer demands for BNPL solutions will likely grow, making it a superior short-term installment payment option even for credit card holders.

Get paid upfront and receive protection from repayment risk and fraud:

The merchant obtains the entire transaction amount upfront, without delay—regardless of the customer’s success in paying their installments. Consequently, buy now, pay later providers/lender-network assume all customer risks, protecting your business from fraud. In cases where a customer files a fraud-related dispute, the buy now, pay later provider bears the risk and any related expenses.

Extend customer reach:

Providing diverse payment methods enables you to establish a relevant and recognizable payment experience, attracting more customers. Buy now, pay later options appeal to younger consumers who frequently lack credit cards: 27% of millennials and Generation Z shoppers utilized buy now, pay later services in 2021. Additionally, buy now, pay later services to possess well-established marketing channels, including shop directories and email marketing, which may present further opportunities for reaching new customers.

* Marketingcharts.com – August 2021 | Data Source: Morning Consult

Enhanced customer experience:

Buy now, pay later payment solutions provide customers with a quicker, more accessible means of obtaining financing. Customers undergo a soft credit check (as opposed to a hard review associated with other financing methods), and there are no separate applications, application fees, or added processing time. Most providers feature easy-to-understand repayment plans and terms. Additionally, returning customers can enjoy a seamless checkout process, finalizing their payments in just a few clicks.

Increased sales conversion

Customers are more inclined to complete a purchase if they can pay over time. Buy now, pay later services help alleviate the sticker shock—making four interest-free payments of $50 appears less daunting than a single $200 credit card transaction with accumulating interest.

Increase the value of sales

Buy now, pay later services eliminate the obstacle to making more substantial purchases by enabling customers to split the payment over time, accommodating their budget. For businesses offering lower-priced products, customers might be more inclined to buy extra items when they discover the option to spread the total cost over in installments.

Problems with providing Buy-Now-Pay-Later

Buy now, pay later (BNPL) is a popular option for consumers who want to purchase without paying the total amount upfront. However, it has many limitations. It is only suitable for specific credit types. BNPL may be an option for those with good credit and a stable income, but it will decline those with lower credit scores, resulting in low approval rates.
Most BNPL loans range from $50 to $1000. For larger purchases, there is a need for other financing options.
Additionally, existing BNPL providers have a one-size-fits-all approach and don’t offer personalized lending. In today’s world – different people need different consumer financing options, and different consumers have unique financial situations; a customized approach can help them access suitable credit for their needs and budget. Without personalized lending options, consumers may be presented with unstable lending options, resulting in an inability to repay, high-interest charges, and potentially damaging their credit score.
The lack of personalized lending options in existing BNPL providers can also be bad for merchants. When consumers are given a one-size-fits-all financing option, it can lead to a higher rate of default and late payments.

Consumer financing Platforms

While both consumer financing platforms and “buy now, pay later” (BNPL) solutions provide consumers with access to credit, there are some advantages that consumer financing platforms have over BNPL solutions. First, consumer financing platforms often offer more flexible repayment terms, allowing borrowers to choose a repayment period that suits their budget and financial situation. In contrast, BNPL platforms typically require repayment within a short timeframe, which can be challenging for some borrowers. Additionally, consumer financing platforms may offer lower interest rates and fees than BNPL platforms, saving borrowers money in the long run. Finally, consumer financing platforms may offer a broader range of loan options and loan amounts, making them a better choice for consumers who need more substantial financing for significant purchases. The main reason consumer financing platforms are more flexible and carry these benefits is that they connect to multiple lenders and are not the lender itself. Overall, while BNPL platforms can be convenient for smaller purchases, consumer financing platforms are often better for consumers looking for more effective and flexible financing options.

Buy Now, Pay Later provider comparison.

Choosing the right buy now, pay later provider depends on the types of products you sell, their prices, and your customer base. When evaluating providers, consider the following:

Repayment terms: Buy now, pay later providers offer varying installment loan plans and term lengths, ranging from several weeks to multiple years. If your business has a high average order value, seek lenders that provide repayment over an extended period (like monthly installments over six months). Conversely, merchants with lower average order values may opt for fewer installments over a shorter duration, such as four installments over six weeks.

Credit limits: Each customer will have a unique spending limit based on their usage, credit, and repayment history. However, some buy now, pay later providers impose minimum and maximum credit limits. Assess your average order value and choose a provider that offers sufficient credit for customers to complete a purchase.

Customer location: Determine the markets in which you would like to provide buy now, pay later services, taking into account your customers’ locations. Often, this may involve offering multiple buy now, pay later providers to maximize your geographic coverage. With ChargeAfter’s multi-lender platform, this is unnecessary because the ChargeAfter platform connects you to the relevant lenders and services in one platform.

Affirm

Affirm BNPL range from 4 interest-free bi-weekly payments to extended installments for eligible customers of up to 36 months. The usual 0% APR loans range from 3,6, to 12 months.

Afterpay

Afterpay, known as Clearpay in the UK and the EU, enables customers to split payments into four interest-free bi-weekly installments or three interest-free monthly installments. With 20 million active users, it operates in Australia, Canada, France, New Zealand, Spain, the UK, and the US.

Klarna

Klarna Pay in Installments lets customers spread the cost of an online purchase over three or four interest-free payments. Klarna Pay Later in 30 days allows customers to complete a transaction and pay the total amount later, with no extra cost. Klarna Financing provides up to 36 months of credit for approved customers.

ChargeAfter

Multi-lender consumer financing

Offering the power of choice, ChargeAfter provides a single application for personalized point-of-sale financing, guaranteeing approval and acceptance rates for any consumer financing option. ChargeAfter’s multi-lender platform caters to all credit types and currencies and connects consumers with suitable lenders for all e-commerce and in-store financing needs.

Consumer finance, not only BNPL

Unlike other platforms, ChargeAfter allows for various types of consumer finance:

• Straight Revolve: A type of credit that a borrower can continue to draw from and repay.

source: wallstreetprep.com

• Deferred Interest (6/12/18/24 Months): The interest is deferred during the promotional period. To avoid paying finance charges, the entire balance must be paid off, in full, at the end of the promotional period.
• Equal pay: Equal monthly payments are required during the promotional period. Interest does not accrue during the promotional period. This type of financing is designed to pay off promotional balance in full within the promotional period.
• Fixed pay: Fixed monthly payments are required during the promotional period. APR is assessed during the promotional period.
• B2B financing: B2B financing can take many forms, including trade credit that can help businesses manage their cash flow, invest in new equipment or technology, and fund growth initiatives. B2B financing can benefit both the lender and the borrower. It can help businesses maintain strong relationships with their suppliers and customers while accessing the capital they need to succeed.
• LTO: Lease-to-own (LTO) is a financing option to lease a product or equipment with the option to buy it at the end of the lease term. This financing option is also available for businesses or merchants.
• Private label credit cards: A retailer or brand issues private-label credit cards that can only be used to purchase at that specific retailer or brand. These credit cards may offer rewards, discounts, or other benefits to incentivize customers to use the card for purchases. Private-label credit cards can help retailers build brand loyalty and increase sales by providing customers with a convenient financing option and encouraging repeat purchases.

Supports all platforms

Easily integrate point-of-sale financing options on your Magento, Shopify, WooCommerce, BigCommerce, hybris, custom platforms, and more with simple-to-connect extensions or basic JavaScript code.

Providing POS checkout financing for your website or physical store has always been more complex.

Credit spectrum

Credit spectrum refers to the consumer’s creditworthiness range, from those with excellent credit to those with poor credit. Lenders use credit scores and credit reports to determine a consumer’s creditworthiness, and this information is used to determine the interest rate and terms of a loan. The credit spectrum typically includes different categories, such as prime, near-prime, subprime, and deep subprime, each reflecting a different level of creditworthiness.

Post-Sale management

ChargeAfter offers all-around performance and transaction reporting through an intuitive dashboard. Access your transaction history, monitor live trades, and effortlessly handle settlements, up-selling, refunds, and partial credits with just a click of a button.

White-label consumer finance platforms

As a large retailer or established brand, ChargeAfter is dedicated to promoting your brand rather than ours. Tailor the entire point-of-sale checkout financing experience to align with your brand identity and provide customized Point of Sale finance offers that your customers will easily recognize.

Support

ChargeAfter prioritizes the success of our merchants by offering 24/7 support and assistance. Whether you require aid with processing financing settlements, custom reporting, or developing creative for your next buy now pay later financing campaign, we’re here to assist you in achieving your goals.

About ChargeAfter

ChargeAfter’s headquarters is in New York. The company’s investors comprise prominent entities such as The Phoenix, Citi Ventures, Banco Bradesco, VISA, MUFG, BBVA, Synchrony Financial, PICO Venture Partners, Propel Venture Partners, Plug and Play VC.

For more information & or to Schedule a Demo, visit- https://chargeafter.com/contact-us/

Join us at the Fintech Nexus New York event on May 10-11, 2023, as we explore the dynamic world of financial technology and its impact on the financial services industry. As a comprehensive media organization, Fintech Nexus delivers vital insights, networking opportunities, and motivation, bridging the gap between conventional finance and its future evolution.

We invite you to visit ChargeAfter‘s booth at this event to witness firsthand how we’re shaping the future of consumer financing. As part of the consumer lending track, ChargeAfter is hosting an insightful panel discussion in collaboration with Citi Bank on May 11th, titled “Will Banks Dominate the Future of Consumer Financing?”.

Take advantage of this opportunity to learn from industry leaders about the latest trends and innovations in consumer financing and how banks are positioned to take the lead.

The panel discussion will feature Terry O’Neil, Managing Director, Head of Embedded Commerce and Strategic Growth at Citi Bank, and Meidad Sharon, CEO of ChargeAfter. The conversation will be moderated by Jeffrey Tower, EVP Business Development from ChargeAfter, ensuring a lively and thought-provoking discussion.

Fintech Nexus New York promises to be an exciting event for professionals from the banking, fintech, and investment sectors, with over 5,000 attendees expected. Be part of this exceptional gathering, and remember to drop by ChargeAfter’s booth to expand your knowledge, forge new connections, and get inspired for the future of finance.

See you there!

The coronavirus epidemic in 2020 and 2021 forced firms to reevaluate and speed up their digitization initiatives more than ever. Years-long planned digitization efforts were finished in a matter of months. These modifications will remain as we move deeper into 2023.

The fintech industry, in particular how established companies involved finance on a different level by integrating financial processes into their whole company plan, is one of the most famous examples of digitalization. With an expected market price of above $138 billion in 2026, it’s obvious that the embedded finance age is here to stay and not simply a passing trend in finance.

 

What is Embedded Finance?

It can be difficult to grasp what this term actually means for individuals who are just getting familiar with the idea, as it is with any new ideas. The use of financial instruments or services by a non-financial provider, such as loan or payment processing, is known as embedded finance. An electrical retailer, for instance, might provide point-of-service insurance for items purchased in-store.

Consumer financial processes will be streamlined through embedded financing, making it simpler for customers to access the services they require when they do. In the past, customers might have needed to physically visit a bank branch to request credit in order to make a significant purchase. Thanks to embedded finance, they can now do both at the same time at the point of service. ChargeAfter, Amazon’s EMI financing choices, Klarna, and Applepay are some of the best-known examples of embedded finance.

The simplicity of embedded finance for consumers is one of its main advantages. Customers could be more likely to finish a purchase and enjoy customer pleasure, which is crucial for fostering brand loyalty, if pain points experienced by consumers are eliminated, such as the requirement to seek credit elsewhere. Because customers are more inclined to buy something and return to do so often, firms may have the possibility to boost profits.

But ease isn’t the only benefit of embedded finance. It also serves as a tool for a greater understanding of consumers, their requirements, and their purchasing patterns. Later, this information can be used to motivate more corporate growth.

 

Five types of Embedded Finance

1.Buy Now Pay Later (BNPL)

Modern consumers are opening a new line of credit thanks to buy-now, pay-later services. Consumers are empowered to shop differently when they have access to a greater variety of items that can be paid for overtime, whether they decide to spend more on a newborn’s travel system or a higher-end piece of home equipment. The consumer is given the option to divide the payment in order to avoid large transactions

2.Point-of-Sale Financing

Integrated lending, goes a step further with loans. Businesses looking to fund larger or more substantial purchases can integrate these financial instruments. To be able to lend responsibly, they frequently need more information, such as information on creditworthiness.

In contrast to BNPL lending, POS financing offers a suite of financing products such as B2B financing, Installments, revolving line of credit and even lease to own. Additionally, the application process is more pleasant and the application form is simpler. POS financing has grown in popularity with omnichannel and brick and mortar-retailers. For instance, Raymour and Flanigan, one of the major furniture merchants, recently began collaborating with ChargeAfter to equip its retail locations and online business with point-of-sale financing.

3. Embedded Insurance

Customers may wish to make certain that, should the worst occur, their money won’t be wasted while investing in a new good or service. Integrated insurance comes into play in this situation. Businesses are in a better position to provide insurance fast by integrating insurance finance technologies.

4.Trading and Investment

Users can connect with their physical bank to make investments in a way that suits their current financial condition and spending patterns thanks to embedded finance capabilities in investment applications. This is an illustration of how a different sort of financial services provider has used embedded finance.

5. Fintech-as-a-service

A fintech API called fintech-as-a-service enables businesses, including non-financial ones, to integrate financial functionality into their current goods, services, and programs.

The use of financial technology-as-a-service products in a whole is growing, from billing to customer acquisition and all in between.

 

Using Embedded Finance

Creating an embedded financial strategy that meets their customer demands can be the first step for businesses. This entails assessing your digital requirements and choosing the tools you want to integrate. Identifying your company’s objectives for its integrated finance initiative is the first stage in that process.

These could include initiatives like enhancing customer service, expanding an existing clientele, or starting a new business to cater to a particular target market or demand. For instance, if you want to enhance client loyalty, one strategy to consider is embedded payment.

For some customers, a BNPL model might increase access to products or services. You could find it simpler to establish yourself as a one-stop-shop concept with embedded finance. But before choosing the best option, you must first be aware of your needs.

 

Connect Lenders and Consumers

If your business is a retailer, connecting consumers with a variety of lenders can also help you. For this reason, ChargeAfter developed a platform wherein a network of global lenders are assigned to any point of sales, connecting them to customers who want to finance.

In other words, ChargeAfter’s multi-lender P2P platform connects the three parties in a way that is mutually beneficial.

 

About ChargeAfter

ChargeAfter is a leading multi-lender platform for Point of Sales Consumer Financing. It connects businesses with the most reliable lenders, enabling them to offer customers the greatest financing solutions. With the best system of Waterfall Financing, ChargeAfter guarantees personalized lending to every shopper, by matching the most relevant lender to every client. Using the unique network and technology, ChargeAfter provides all parties, merchants, lenders, and consumers, with the best shopping experience. Phoenix, MUFG, VISA, Bradesco, BBVA, Synchrony, PICO Partners, CITI, Propel Venture Partners, Plug and Play, and other companies worldwide are among the investors of ChargeAfter.

 

Arvind Ronta, the Global Head of Installments at VISA, discussed in an interview at Money 20/20, how the company is revolutionizing the way cards operate and positioning itself as the industry leader in installments.

VISA seeks to provide a platform that will enable banks to offer installments at the point of sale more effectively as consumer financing and BNPL services change. By connecting lenders with a vast number of merchants, they can global acceptance, allowing the Buy Now Pay Later loan to be used anywhere. FinTechs, such as ChargeAfter, play a significant role in expanding BNPL and consumer financing options and giving merchants the opportunity to provide it in all types of point of sales – ecommerce, in store and call centers.

As banks began to work with BNPL white label platforms of FinTech companies, they gave merchants shops the option to offer various branded financial services, which all encourages the development of embedded finance. Visa strives to offer a platform and a product that both consumers and business owners will enjoy and use.

References 

• ChargeAfter, 2022. “How Visa is Turning Your Card into an Installment Powerhouse”.

 

“Disclaimer: This article’s information is provided for educational purposes only and shouldn’t be taken as legal advice on any subject. The author disclaims all responsibility for any damage of any kind caused by the use of such information.”