Category: Blog

As consumer behavior rapidly shifts toward more flexible and varied POS financing options, banks recognize that they need to expand beyond their traditional lending models and diversify their lending products and offers. Partnering with a fintech technology provider like ChargeAfter’s Lending Hub is pivotal for banks to succeed.

The Lending Hub offers a comprehensive all-inclusive embedded lending platform for banks to create, manage, and distribute a wide range of POS financing products – from consumer finance with revolving lines of credit, short and long-term installments, BNPL, and personal lending. By adopting such diversified offerings, banks can cater to the nuanced and evolving needs of modern consumers, enhancing customer satisfaction and loyalty.

Challenges addressed by ChargeAfters’ Lending Hub

One of the significant challenges faced by banks is the complexity of merchant onboarding and integration. ChargeAfter’s Lending Hub simplifies this process through its robust enablement tools and streamlined merchant onboarding protocols, reducing operational costs and time and increasing merchant satisfaction. This approach not only accelerates market entry but also establishes a stronger network of merchant partnerships, essential in today’s competitive environment.

The Lending Hub also addresses crucial aspects like the protection of Personally Identifiable Information (PII). In an era where data security is paramount, ChargeAfter ensures compliance with the highest standards of data protection, giving both banks and their customers peace of mind.

As shopping behaviors evolve, banks need to adapt to the natural evolution of shopper needs. ChargeAfter’s Lending Hub enables banks to stay ahead of the curve, offering tailored POS financing solutions that resonate with contemporary consumer demands. This adaptability ensures that banks remain relevant and competitive.

The technological backbone of ChargeAfter’s Lending Hub aligns perfectly with the banking core architecture. By leveraging cloud-based hosting and microservices, the platform ensures scalability, security, and operational efficiency. This infrastructure supports an agile development process, allowing for rapid deployment and continuous improvement of financial products. This agility is vital in a financial world that demands quick adaptation to market changes and consumer trends.

Partnering with ChargeAfter’s Lending Hub is not just about offering a range of financial products; it’s about embracing a holistic, future-forward approach to banking. It’s about meeting the needs of today’s consumers with innovative solutions and cutting-edge technology. As banks look towards a new era of digital finance, ChargeAfter stands as a valuable ally in navigating this journey together.

Jeffrey Tower
EVP Global Business Development
Jeff has over 20 years of experience driving revenue through building global brand awareness, business development, marketing, and sales departments focused on consumer financing, fintech, and eCommerce.

We are delighted to share that ChargeAfter has received the award for “Best Banking Services Provider” in Furniture Today’s 2023 Reader Rankings. Additionally, we were named a  “Best Consumer Finance Company” finalist. 

The Furniture Today Reader Ranking awards are a celebration of excellence within the furniture industry. They hold special significance as readers nominate and vote for each award. The recognition underscores the value we bring to merchants by helping them seamlessly provide personalized financing choices to their customers at every point of sale. This acknowledgment reflects the appreciation of those within the furniture industry who understand the impact of our embedded lending platform in boosting approval rates, building brand loyalty, and increasing sales conversion. We want to say a big thank you to everyone who voted for us!

It is also significant that our fellow finalists and winners of these two awards are our lending partners, confirming what we already know – that we are working with the best of the best! Congratulations to Wells Fargo, Synchrony, and Koalafi and the winners and finalists in every category. 

When it comes to evaluating a POS lender for your business, merchants, service providers, and contractors typically focus on two metrics – approval rates and cost.

Pricing is straightforward to assess, but what about approval rates? Are they a reliable metric for comparing financing programs?  

While approval rates are essential, they are only part of the story. If upgrading your point-of-sale financing experience is on your agenda, there are additional factors that you should consider to evaluate finance providers uniformly.  

1.  POS financing approval rates
2.  Approval amount
3.  Loan terms & conditions
4.  Does the financing amount offered meet the sale amount

A summary of each is provided below.

POS Financing Approval Rates 

What does it mean if a point-of-sale finance provider indicates they have an approval rate of 80%? Are they referring to ecommerce applications? Perhaps they are talking about in-person or in-store applications. The consumer finance provider likely has different underwriting strategies for each channel that affect approval rates for that channel. Given this complexity, a better indicator would be approval percentages by consumer fico tier and channel(s) as appropriate.  

Approval Amount

Another important factor when selecting a consumer lending partner is whether their minimum and maximum loan amounts align with your ticket requirement. For example, if your average ticket is less than $300, you are probably focused on BNPL providers. If the average ticket is $3,000, deferred interest options like 0% interest and extended terms will be critical.  

Loan Terms & Promotions

The most popular POS lenders bring extra value to the table beyond just cost, approval rates and approval amounts.  These providers act as a cousultant and advise you about trends and best practices in consumer finance. Consider the added value of a partner that can explain the benefits of a deferred interest program versus equal payments with no interest or why installment loans might be better than revolving lines of credit for your customers.

Financing Offered Meets the Sale Amount

This is one of the most critical, but often overlooked, metrics when choosing the best lending partner for your business.

You need to understand the percentage of the lender loan offers that equals or exceeds the purchase amount requirement. Having a high approval rate is great, but what good is a loan offer that doesn’t allow the consumer to make the purchase?
For example, how helpful is it to offer your customers a $1,500 loan when trying to sell a treadmill for $2,500?

Purchase Conversion Rate

The Purchase Conversion Rate is arguably the most important metric and answers whether a finance program will drive sales.  

The conversion rate is the percentage of offers accepted by the consumer and utilized to make a purchase. Factors that impact conversion rate can include:

• Is the consumer redirected from the merchant website to apply?
• Is there a seamless transition from one program to another if the consumer is declined?
• Are the repayment terms and conditions agreeable?

If the consumer experiences friction anywhere in the purchase process, they are more likely to drop out and abandon the cart.
A seamless customer journey with agreeable terms and conditions is more likely to result in a purchase. 

The Embedded Lending Platform Advantage

One of the major advantages of ChargeAfter’s embedded lending platform is the ability to provide merchants with these analytics and much more. Merchants can view the performance of each lending partner in a single console and on a near real-time basis.  

With this data, merchants are empowered with the tools they need to better evaluate the performance and effectiveness of their lending partners, identify any gaps in consumer coverage, evaluate new promotion offers, and even perform A-B testing with various lenders.  

ChargeAfter operates the largest network of lending partners offering installment loans, private label credit cards, revolving lines of credit, BNPL, subprime lending, lease-to-own, and even B2B financing. A single integration with ChargeAfter provides you with access to all of the programs and tools you need to maximize finance penetration.

 

About Kevin Lawrence
VP Global Lender Relations

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, financial institutions, and retailers. Kevin is an expert in embedded consumer financing and B2B financing and has a deep understanding of current trends and where the industry is heading.

In today’s fast-paced retail environment, ensuring customers have seamless access to  financing choices is critical to boosting sales and building customer loyalty.  The ability to pay for goods over time through financing can be the deciding factor when completing a purchase. This is especially true during this period of inflation when people are more protective of their resources. Even without inflation, consumer demand for financing is likely to continue as credit cards drop in popularity with younger generations. 

One of the consequences of the rise of demand for consumer financing is that it has become impossible for merchants to create and manage an exceptional financing offer in-house. To manage a robust financing offer, retailers require a technology partner to integrate point-of-sale financing into modern customer journeys. This solution is best provided by a platform that can meet the needs of diverse customer profiles while being fast and easy to use for customers and merchants alike. Implementing the right consumer financing platform has become a strategic must for merchants. 

For leading merchants, ChargeAfter is the platform of choice. Here are seven reasons why.

7 Reasons Why Leading Merchants Choose ChargeAfter 

1. A seamless omnichannel financing experience
2. Expansive Network of Lenders
3. Easy integration and management
4. Unwavering Compliance and Security
5. Higher Approval Rates Equate to Increased Sales
6. Actionable Analytics and Data
7. Customize with White Label Consumer Financing

A Seamless Omnichannel Financing Experience

Your customers expect a seamless, omnichannel purchasing experience, especially for big-ticket items. Some customers start their purchasing journey online before heading to a brick-and-mortar store or interacting with a call center. Your financing offer must be embedded into these omnichannel journeys. Your offer must also be flexible enough to meet your and your customer’s needs and not be tied to rigid experiences, such as in-store stands serving a long line of customers.

ChargeAfter enables this with a state-of-the-art customer-facing application. It makes it easy for you to offer different ways to access financing choices at every point of sale. This can include a QR code in-store or online, sending customers a link to apply, promotional links on your eCommerce site, online pre-approval, and in-store devices – whatever works best for you and your customers.

Expansive Network of Lenders

With over 40 lenders embedded into ChargeAfter’s platform, you can easily offer your customers access to diverse financing products that to cater to every consumer, regardless of their financial standing. As a result, your approval rates are likely to increase to up to 85%. 

Especially during economic fluctuations, having a diverse range of lenders, including B2B financing options, ensures every customer is included. The platform also offers merchants the flexibility to introduce their preferred lenders. Such an expansive network ensures that you remain resilient against individual lender decisions and allows you to capitalize on every sales opportunity.

Easy Integration with Waterfall Finance Methods

The platform stands out with its simplicity. Merchants can enjoy easy integration of this embedded finance platform into their systems. ChargeAfter uses a waterfall finance method that instantly matches customers with the best lending offers suited for their credit profiles. Additionally, its post-sales management features—dispute resolution, refunds, and reconciliations—provide real-time insights. Such embedded financing ensures that merchants and consumers can transact with ease and speed.

Customize with White Label Consumer Financing

ChargeAfter’s white-label POS system allows customization for businesses prioritizing brand identity, reinforcing brand loyalty. Whether you’re seeking a white-label BNPL solution or comprehensive white-label consumer financing, ChargeAfter has you covered.

Unwavering Compliance and Security

Data security, especially in e-commerce financing, is paramount. ChargeAfter’s commitment to both transactional and personal data security is exemplary. Their platform ensures that every piece of data, from credit details to personal identifiers, is guarded against potential breaches. Furthermore, they adhere to all financial regulations, both federal and local. This commitment to embedded finance solutions, combined with unwavering security protocols, ensures merchants can focus on selling, free from the hassle of intricate financial regulations.

Higher Approval Rates Equate to Increased Sales

Through its multi-lender setup, ChargeAfter revolutionizes POS financing. With a broader spectrum of lenders, consumers enjoy a higher likelihood of loan approval, motivating them to finalize their purchases. This embedded lending approach ensures sales and makes your offerings more accessible to a broader audience.

Actionable Analytics and Data

Data-driven insights are crucial for improving customer experiences and optimizing sales strategies. ChargeAfter offers comprehensive analytics, allowing merchants to understand their customers’ buying journeys. Whether it’s identifying drop-off points or successful conversion moments, these insights enable the optimization of the POS lending process.

Case Study: Jerome’s

The success story of Jerome’s Furniture, a legacy brand with over six decades of experience, has been profoundly enriched by its partnership with ChargeAfter. Jerome’s astute integration of ChargeAfter’s consumer financing platform showcased how forward-thinking strategies can lead to exponential growth, even during economic uncertainties. With a commendable 67% increase in customer financing adoption, Jerome’s has ensured its clientele can afford quality furniture without financial strain. This case study underscores the pivotal role consumer financing plays in modern retail, exemplifying how strategic collaborations and a focus on customer-centric solutions can yield impressive outcomes.

Want to delve deeper into Jerome’s Furniture’s remarkable growth journey with ChargeAfter? Download the complete case study and discover the transformative power of consumer financing in the retail sector. Grab your copy now!

In conclusion, as merchants search for an efficient point-of-sale financing platform, ChargeAfter emerges as a frontrunner. Its focus on omnichannel lending and features like white-label BNPL solutions and waterfall financing ensures that merchants and consumers enjoy unparalleled experiences. In the evolving world of consumer finance and in-store financing, having a partner like ChargeAfter can be the game-changer that sets a business apart.

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 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.

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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