As Point of Sale consumer financing has started to gain significant popularity across the globe, there are still concerns consumers have regarding this payment model. And these concerns are rightly justified given the current financial impact COVID 19 has had on the economy. 

For many, there is an unwavering fear about getting sucked into a vicious cycle of debt. Consumers are tired of getting their fingers burnt by lenders and some are still trying to pay off hefty loans that come at an extraordinarily high interest rate.  Since Buy Now, Pay Later is a relatively new loan model on the market, there are a lot of missing pieces of information that have sparked some misconceptions around the way this financing works. To put your mind at ease, here are a few facts that debunk the myths around using Buy Now, Pay Later solutions:

Myth: Consumers Are Charged Exorbitant Fees And Fines When Opting For POS Financing

False. It’s easy to see why shoppers are wary about hidden costs, however, the Buy Now, Pay Later finance model does not work in the same way that a credit card does. You do not get any unexpected bills and amounts in the post. ChargeAfter’s consumer financing services provide shoppers with a transparent and detailed breakdown of the payment plan before you check out. There are no sign-up fees or ongoing fees once the full payback plan has been settled.

Myth: POS Financing Affects Your Credit Score

True and False. It all depends on your debt habits. If you keep up with monthly payments or are able to settle the entire installment amount before the agreed payment period expires, then it won’t have any negative impact on your personal credit score. However, if you default on monthly payments or are unable to fulfill your end of the agreement in the predetermined period of time, then it can have a negative effect on your credit score, as is the case with any type of credit or loan model.

If you have a healthy financial mindset in terms of paying back debts, then you can rest assured knowing that your credit score will be intact when using ChargeAfter’s POS financing options.

Myth: Applying For Buy Now Pay Later Is A Lengthy Process

False. There is no denying that the biggest downfall of applying for credit is the amount of time it takes. Not to mention the fact that every aspect of your financial past is scrutinized with a fine-tooth comb. However, Applying for Buy Now, Pay Later is a simple process that takes a few minutes to complete. Once you have selected the POS financing option on check out, your details are matched against a large network of lenders. If your application meets the criteria in this network, the loan is approved immediately. There is no need to visit a bank or fill out mountains of paperwork. The application is completed without ever leaving the counter or checkout page. 

Myth: You Need A New Credit Card When Applying For Point Of Sale Financing Plans

False. You do not need to sign up for a new credit card or any other type of store card when applying for Buy Now, Pay Later solutions. As we mentioned before, all that is required is a few simple pieces of information during check out. You are also able to choose whether you want the monthly payments to be charged to your existing debit or credit cards. 

When done responsibly, using Buy Now Pay Later options from ChargeAfter is a seamless and affordable way to get the goods you want without breaking the bank or getting yourself into mountains of debt.

Benefits Of Lending To Consumers Through Point Of Sale Financing

The world as we know it has changed and in these difficult financial times, people are becoming more aware of how and when their hard-earned money is spent. We live in an era where credit is king simply because prices have skyrocketed and interest rates are through the roof, yet wages remain the same. For those fortunate few, paying for high ticket items such as furniture is still possible, but for the rest, it simply does not fit into the budget. And for those who do have some form of credit available for these items, the fees and interest rates are unjustifiably high, putting them out of pocket and unsure of the next bill amount in the mail. 

This is a very real situation that many of us face and more customers are looking for flexible payment options that are transparent, easy to apply for, and offer more bang for their buck. This is where the importance of Point of Sale financing options comes into play.

Point Of Sale consumer financing, or buy now, pay later is a form of credit that is offered on check out. When customers choose this option, they are asked to fill out a quick application for a small loan. Their data is vetted against various lenders and should they meet the criteria, they are instantly approved for the loan. These microloans are broken down into affordable monthly payments without any hidden fees, so the customer always knows how much they are in for before accepting the terms. But it’s not just the customer who benefits from this online financing, you as the merchant also stand to gain when offering this line of credit.

Here are some of the benefits you as the merchant can enjoy with Point Of Sale financing from ChargeAfter:

New Customers

Even if you have a strong marketing campaign and have invested in an SEO strategy, if customers can’t afford your product, there is simply no way they can close the sale without credit options. Offering one line of credit in the form of in house or bank cards is just not cutting it anymore. Many consumers, especially millennials are hesitant to use credit cards because of the debt and costs associated with them. Instead, more are turning to buy, now pay options. 

Providing consumers with an easy way to assess credit without exorbitant fees will help your marketing efforts by driving more customers to your store. 

More Sales

The average cart abandonment rate across all industries is almost 70%, which means that approximately seven out of ten customers will not complete a transaction. There are many factors behind abandoned carts, however, the most prominent is the limited number of financing options available to shoppers. The solution to this issue is to eliminate certain pain points during the checkout and ensure a smooth experience. Shopping cart financing options like buy now, pay later allow customers to pay a small amount upfront and settle the rest with affordable monthly payments. 

By offering customers this option they are not as price-sensitive as they would be when they have to fork out the entire amount upfront. This also helps to increase the average order value as shoppers are more likely to go for the more expensive option for just a few more dollars per month. More transactions of a higher value means more profit for your business.

Fewer Risks

Investing in in house store credit is a capital intensive exercise that carries a lot of risks. By offering consumer financing like buy now, pay later, the risk of late payments or no payments doesn’t fall entirely on your shoulders as the merchant. Instead, you are allowing your customers to connect directly to lenders who provide the loan. This means that you do not need to worry about the terms of their agreement or take on all the risk in the event that a customer does not hold up their end of the bargain. 

By partnering with a reputable Point Of Sale financing like ChargeAfter you are able to grow your business, customer base, and sales without the hassles that come with traditional forms of credit! 

The way we do things is changing at a mind-boggling pace. Technology has become such a pivotal part of our lives, it is hard to remember life without it. While some businesses are still catching up to the digital age, most have dedicated most of their focus to winning over customers online by changing business models, moving transactions online, and incorporating new conversion strategies to meet the needs of the modern-day shopper. 

As retailers shift their goals and tactics to satisfy the instant personalized experience shoppers have come to expect, here are a few trends to jump on in the coming year.

Improvements Customers Are Looking For

Before we dive into the trends, here are a few improvements customers are looking for when dealing with retailers in general.

• 63% of customers have stated that they want up to date and transparent information on websites.
• Roughly 93% of customers do not convert on eCommerce sites and the main factor behind this is shipping costs and product price.
• 88% of customers state that their buying decisions are based on speed and cost of shipping.
• 86% of shoppers want to purchase on the channel of their choice when shopping.
• Shoppers want more options from inventory, delivery, and payment.

These are just a few things shoppers are looking for and what your business should take into consideration going forward. While your store isn’t being solely judged on the services or goods you offer, the entire user experience is where most of these concerns stem from.

However, implementing a few of the tips below can help address some of these concerns and influence a buyer’s decision in a positive way.

More Flexibility 

As we mentioned before, customers are looking for more options and flexibility when it comes to shipping and payment methods. While credit cards and digital wallets are commonly found across the board, they are not a one size fits all solution for everyone. Credit cards add to the influx of debt most consumers are already trying to wrangle and not everyone has the luxury of qualifying for one in the first place. Digital wallets are convenient for online payments, however, this does not really meet the needs of consumers who do not have the total amount of funds available when checking out on your platform. 

Consumers are looking for more financing options that give them the flexibility to pay off the purchase without high interest or APR‘s in order to maintain their financial well being and responsibilities to other debts. This is the reason why buy now pay later, or also known as Point of Sale financing is gaining a fortune of traction in the eCommerce space. 

Offering Point of sale financing on checkout is a selling point that enables customers to purchase high-quality goods that are normally expensive without laying out the full amount upfront. And with partners like ChargeAfter, payment plans do not come with the hefty APR increases. 

In addition to flexibility, buy now, pay later solutions offer consumers more transparency when purchasing. They know exactly what they are in for without hidden charges before they have finalized the deal. 

More Authenticity

Gone are the days where aspirational marketing once ruled. While these strategies may work for some companies, consumers prefer to see real people. The focus on celebrities or the ultra-slim does not appeal to the majority of consumers today. Instead, shoppers are connecting more with everyday individuals who don’t fit the mold that the media loves to portray. Body positivity, more inclusion, and more diversity are more valuable in connecting with your audience. According to a survey, 63% of Gen z’s prefer to see everyday individuals as opposed to celebrities in ads. Another report highlights that brands that utilize diverse ads are more likely to convert customers than those who don’t. 

Innovation In User Experience 

User experience has always been the key to more conversions, however, consumers are looking for more innovation in the service and experience they receive from merchants and retailers. This can be achieved by loyalty programs, points, or a full-blown virtual experience with a human element. For example, capturing the attention of Gen z by giving them a virtual alternative to trying clothes on in-store by allowing them to try on or test your products virtually with augmented reality technology.  The possibilities in innovation are endless and once you give consumers a memorable experience, their loyalty to your brand will grow. 

Implementing a few of these tips will not only help satisfy the expectations of your consumers but will also help increase conversions and close more sales. 

COVID-19 has had a profound impact on consumer behavior, one that will have a lasting effect even after the pandemic passes.   As consumers continue to be limited by travel restrictions and the number of people who can be in the same building concurrently, they are increasingly shifting their spending from in-store to online.  According to research by eMarketer, online sales have increased by 450% in 2020 in some sectors, largely driven by COVID-19.  But despite this surge in online spending, some merchants are still missing out on revenue opportunities.

What’s driving these missed revenue opportunities?   It is the credit squeeze between consumers and lenders.  Consumers need more credit to support their increased online purchasing, but lenders are making it more challenging to secure credit by imposing stricter borrowing criteria.  This causes many customers to be denied the credit they need to make the purchases they want, which in turn causes merchants to miss out on valuable sales.

Consumers are Spending More Money on High Ticket Items Online

Consumers are buying higher-priced items online, and also increasing their overall order sizes.   According to eMarketer, average order values through online sales is up 36% in the first nine months of 2020.   There are two key trends driving the spending hike:

Home Offices and Schools – COVID is driving millions of consumers who are now working from home or attending school remotely to make investments in their homes to facilitate better remote working environments.  They are buying furniture and home office technology to make working from home tenable over the long term.   

Recreational Activities – The second investment consumers are making is in recreational activities.  With many facilities closed or open in limited formats, consumers are exchanging gym memberships for in-home equipment, foregoing dining out for upscale cooking appliances, and trading travel for bigger and more sophisticated home entertainment systems, and staycation items, including outdoor furniture, camping gear, bicycles and more.   

Consumers Need Affordable Financing Options

Consumers’ home investments carry relatively high price tags, often exceeding their ability to fund for them upfront, or their comfort in financing at credit card interest rates.  Additionally, younger consumers may not even have a credit card.  A recent report by Business Insider stated that more than 60% of all Millennials do not even use credit cards, relying instead on cash and debit cards, which makes it harder for them to fund large purchases all upfront.

To address these concerns, merchants are beginning to offer their customers financing at checkout. This point of sale financing allows customers to pay for larger purchases over time (typically anywhere from 6 to 48 months) at an interest rate which is much lower than those of credit cards.

Consumers like point of sale financing because it enables them to spread the cost of large ticket purchases over a period of time, rather than all at once.  A customer may not be able to spend $2,000 on an in-home spin bike but is happy to pay $50 per month over the course of 40 months. On top of that merchants often subsidize the cost of the loan, binging the interest rate down to 0% or near 0%.  This is far cheaper than the average 15% interest rate consumers incur on their credit cards.   

But Banks are Tightening Lending Requirements

Given the volatile economy, where many people are unemployed or at risk of losing their jobs,  it is not surprising that banks are making it increasingly difficult for consumers to borrow funds.   Many lenders only offer prime credit, which is available to only the lowest-risk borrowers. Prime lenders look at different factors including credit history, credit rating, income level, and history, and existing debt utilization. Customers who fail to meet the strict requirements or are considered a high-risk borrower, are not approved.  While the lender may have avoided high risk, the merchant loses the sale. The data show that when only prime credit is offered, roughly 70% of applicants are turned away.  This is a tremendous risk to merchants. 

How Merchants Can Avoid Getting Squeezed Out of Sales

Merchants who want to cash in on these trends of larger online purchases need to eliminate the credit squeeze.   The best way to eliminate the credit squeeze is to increase the supply of credit at checkout.   Not only do retailers need to offer consumers more financing options, they also need to make sure they provide options that meet the needs of customers of varying credit profiles, including prime, near-prime, and subprime. 

Merchants should think about point of sale financing in the same way they do credit cards.    They don’t partner with just one bank to accept only their credit cards.  Rather, they partner with platforms including Stripe and Authorize.net to accept hundreds of credit cards across every bank and network.  That one partnership allows the retailer to accept any credit or debit card, regardless of whether it’s a Citibank issued VISA card, a Chase Mastercard, or an American Express Platinum card.   So too should they do with point of sale financing.  Rather than partnering with one lender who lends exclusively to prime borrowers, retailers need to partner with a platform that will allow them to provide multiple financing options to customers across a broad range of credit profiles.   

It’s no secret that the COVID19 pandemic has changed many things about the world we knew. While it has caused some disruption in our day to day lives, the pandemic has hit the economy the hardest. Consumer spending dropped by a staggering 7.5% during the economic closures around the world in March and April. This estimates a decline of nearly $1 trillion in revenue, which the US economy has not seen since 1987.

Unfortunately, this has led to many people losing their income and with that, their ability to make costly purchases. Consumers are rather using the money they have to pay off existing debts. In addition to that, consumers are more conscious of how they spend their money and are growing wary of using credit cards due to the interest that adds to already mounting bill payments. According to large credit providers, transactions made by credit cards decreased by 31% by the end of April. 

Retail and eCommerce stores have had to adapt to the current crisis and change the way they operate in order to meet the demands of consumers, which means taking consumer’s financial constraints into consideration. The goal for many retailers now is to offer flexible payment methods to help reduce some of the financial burdens the pandemic has created. Buy Now, Pay Later or also known as Point Of Sale financing has been the solution for many consumers and merchants alike and continues to grow in popularity during this uncertain time. 

Buy Now Pay Later Has Provided More Financial Security 

Due to the structure of Buy Now, Pay Later financing, it has become a viable solution for most businesses. Taking a large purchase and breaking it down into smaller monthly payments allows consumers more financial flexibility when purchasing expensive goods. Another reason why this payment method has become more attractive to consumers is that in most cases, it comes without interest if the consumer is able to pay off the loan quickly. 

The terms offered by Point Of Sale financing partners like ChargeAfter also make it easier for consumers to apply and get approval for instant loans. The pandemic has affected the income of many people and some are not earning as much as they used to. 

With prime lenders and larger credit providers, income is usually the deciding factor. And should a consumer not fall into the earning bracket requirement, they are turned away. The Buy Now, Pay Later model caters to those who prime lenders see as a high-risk borrower and offer more flexibility in terms of approvals and payback terms. 

This has allowed consumers to purchase or replace higher value goods like refrigerators and furniture even in a time when financial pressures are at an all-time high without using a single credit card.  

The Shift From Traditional Credit

Long before COVID19 ravaged throughout our cities, Buy Now Pay Later solutions were already gaining steady traction, especially among the younger generations like millennials. However, the need for these payment plans have become more prevalent in the wake of the pandemic. 

The younger demographics who may not have steady jobs or who are currently relying on their savings to get through this current global situation have become more inclined to online financing like Buy now Pay Later. According to research, only 34% of millennials added to their credit card debt since COVID19. This could be due to many factors, however, these are the consumers who are most aware of the interest, bad credit ratings, and debt associated with credit cards and are turning away from them altogether. With preexisting financial strains like mounting student loans and other high-interest debts, the younger demographic already has a distaste for traditional credit. 

Buy Now Pay Later has quickly become the solution to purchasing high ticket items among the younger generations. It offers more transparency with predetermined monthly installments that do not have any extra “surprises” on the bill and also enable consumers a sustainable and affordable way to get the goods they want. 

Based on this, there is no doubt that Point Of Sale financing will continue to grow steadily as the world returns to a new normal. 

Key Features Of ChargeAfter’s Point Of Sale Financing Platform

Partnering with an established and trusted Point of Sale financing provider can help empower your business. From increasing revenue to improving customer retention and reducing abandoned carts, there is certainly no shortage of benefits when it comes to offering online financing. However, with most consumer financing partners, integrating these solutions into your business can be a tedious and lengthy process. In most cases, it requires complex development and time to wrap your head around the system not to mention the time it takes to train staff members. This all takes up vital resources that could be used to focus on key components of your business. 

ChargeAfter has developed an online platform that eliminates most of these frustrations by providing merchants with a state of the art decisioning engine, omnichannel technology, and endless resources to help unlock the platform’s full potential and maximize your brand’s profits. Here are a few key features of the ChargeAfter POS financing platform:

Seamless Integration And Testing

ChargeAfter’s platform simplifies integrations based on your needs by using 3 different channels. This allows merchants to choose the best approach based on their existing systems, sales, and functionality. These include:

• Integration using eCommerce plugins for major platforms including Shopify, Magento, WooCommerce, BigCommerce, and other renowned platforms available on the market.
• JavaScript SDK that can be integrated into stores who do not work with the supported platforms mentioned above but rather use their own custom-built systems and technologies. 
• Custom-developed integrations via the RESTful API that allow merchants to build a unique checkout experience while using ChargAfter’s core capabilities and functionality. 

In addition to seamless integration, ChargeAfter also provides merchants with testing tools and a Sandbox environment to ensure your current system and processes are not affected during development and integration. 

White Label Options

Using a consumer financing partner platform shouldn’t mean that your branding and identity are lost during the application and checkout process. Your customers identify with your brand and ChargeAfter is dedicated to making your brand shine, not ours. Our white label solutions allow you to customize and personalize the entire shopping cart financing experience inline with your corporate identity.  

Omni-Channel Financing

ChargeAfter’s functionality and capabilities are not limited to one location or eCommerce platform. Merchants can use our integrations in retail stores or call centers in any location. Merchants are also able to offer consumer financing across multiple currencies, which is extremely beneficial for brands that are expanding their global reach.

Account Management And Reporting

One of the downsides to some platforms is that there are limited capabilities when it comes to full reporting and actions on accounts. ChargeAfter provides merchants with a comprehensive dashboard that enables you to cancel, refund, reconcile, or settle paid-up accounts. The reporting features also allow you to track and measure data, which is beneficial for marketing, upselling, and forecasting. 

Direct Access To A Multi Lender Network

You don’t need to spend the time or effort trying to source a network of lenders. The ChargeAfter platform connects to various trusted lenders in the industry that will facilitate the loan and payment terms based on the applicant’s details. Having a variety of lenders will also help improve approval rates. More approvals mean more happy customers and more sales for your business.

Security

Everyone is entitled to data security and privacy, something that is always top of mind for ChargeAfter. When dealing with sensitive information like payments and personal information, it is important to have the tools in place to protect that data at all costs. The ChargeAfter platform is ISO/IEC 27001:2013, 27018:2014, and PCI level 2 certified and offers security features like fraud prevention to keep all merchants, lenders, and consumers data safe.

Additional Support

As we mentioned before, limited resources can cost your business and staff a lot of time. The ChargeAfter team offers 24/7 customer support for any errors, issues, or questions you may have about the platform. Whether your staff needs a little assistance with processing a settlement or needs help with creatives for your online financing campaigns, someone is always available to assist.

What Is The Difference Between Traditional Credit And Point Of Sale Consumer Financing?

Consumer financing has become a pivotal part of the shopping journey. For many, paying for high ticket goods like electronics and furniture upfront is almost impossible, which is why there is an expectation for more flexible financing options in the retail space. The option to use credit cards has always been available for most shoppers, but is it the most financially savvy decision?

The short answer is no. Some of these items could cost you up to $2,000 or more and just because it is not coming from your own pocket, it is still a hefty amount to pay upfront, not to mention that you start eating into your credit balance. Fortunately, there are more affordable financing options out there like ChargeAfter’s Buy Now, Pay Later online financing. 

Let’s dive deeper into the main differences between these two payment options to see why Point Of Sale financing is becoming the leading choice of payment amongst consumers.

The Downfall Of Traditional Credit Cards

Credit cards have been the dominant source of financing in the past, however, it has also become synonymous with mounting debts and severely affected credit ratings. The problem with this type of financing is that consumers are forced to pay the total amount for their goods upfront. This means that the consumer depletes their available credit faster and the monthly charges to pay back the outstanding balance are far more costly due to fluctuating interest rates, services fees, and additional APR costs ranging from a staggering 17%. In many situations, buying on a credit card leaves little room for emergency expenses when it’s needed the most – and why should consumers be forced to choose between buying a new mattress and rainy day funds? 

Getting approved for credit is no easy feat either and many do not meet the criteria. In fact, up to 70% of applications are rejected due to their current income, existing debts, and credit history.

It is because of these reasons that more and more people are steering clear of traditional forms of credit. According to recent research, 68% of Millennials do not own a single credit card and Gen Z is following suit with this trend. This leaves a large gap in the market and instead of capturing the attention of these shoppers, they are either forced to make do without or to save over a few months just to get the goods they want, which is not the ideal outcome for any merchant.

Opening The Door Of Opportunity With Point Of Sale Consumer Financing 

Buy Now, Pay Later solutions hone in on the pain points associated with traditional lines of credit and help put the buying power back into the hands of consumers. While this form of borrowing isn’t a new concept, it has evolved in favor of both the consumer and merchant. Unlike credit cards, shoppers do not have to foot the entire bill on purchase. Instead, they are able to purchase the product with an instant loan that offers affordable payback plans. 

For example, if Charlie is looking to buy a new MacBook Pro, he is in for a total amount of around $2,400. Instead of putting the total cost on his credit card and depleting his balance, Charlie is able to opt-in for ChargeAfter’s online financing solutions. After filling in a quick application form, Charlie’s details are vetted against various lenders, and once approved, he gets access to an instant loan. Charlie gets his goods immediately with no extra charges to his credit card and gets to enjoy a 12-month payback plan with a 12% interest rate and no APR’s. His total monthly costs to pay back the loan would be $196, which does not fluctuate or affect his credit score. 

Charlie has a new MacBook Pro, a positive balance on his credit card for emergency expenses, and a generous amount of time to pay back the loan without ever leaving the checkout. And as the merchant, you have a new sale and a happy customer who is more than likely going to return to your store after receiving a positive and easy financing experience!