Credit has Revolutionized

Did you know that point-of-sale financing has been around for over 80 years? Throughout this time, technology has played a crucial role in helping checkout financing reach new levels of potential, improving the shopping experience for consumers. A more seamless purchasing process not only brings credit to customer loyalty but also boosts sales for businesses.

One of the earliest and still-used forms of point-of-sale financing is the layaway model. Popular in stores like Macy’s and Sears in the early to mid-1900s, this method was primarily used for household appliances and luxury items. The layaway concept allows a customer to place a deposit on an item and pick it up after making additional payments. However, unlike today’s financing options, customers couldn’t use their purchases immediately.

For example, consider Jill, who needed a new washer and dryer. The total cost of the set was $1,398, which she couldn’t pay upfront. With a layaway plan, Jill could put down $300 and pay off the remaining balance in biweekly payments over eight weeks. While effective, this method kept Jill from using her new appliances immediately. As credit cards gained popularity, layaway plans became less common due to the convenience of immediate purchases.

The rise of credit and private label cards

As credit cards became more accessible, new forms of point-of-sale financing emerged. Co-branded, private label, and core sales finance cards became popular tools for merchants and consumers. These cards offer various incentives and flexibility when financing large purchases

Co-branded cards, such as the Delta SkyMiles card or the Amazon Rewards Visa, are designed to build loyalty by offering rewards that can be redeemed at the issuing retailer and other stores. On the other hand, private label cards are limited to use at a specific retailer and focus on offering rewards and loyalty benefits. Meanwhile, core sales finance cards cater to financing big-ticket items in the jewelry, furniture, and electronics sectors.

While traditional credit cards were once the primary option for financing purchases, modern consumers now have more flexible alternatives through new point-of-sale financing platforms.

Credit’s role in modern point of sale financing

Credit has become an essential part of American consumer culture. The convenience of instantly purchasing goods and services with the swipe of a card has shaped how people shop. However, for mid- to high-ticket purchases, point-of-sale financing offers a more appealing option for many consumers

Customers can apply for financing at the point of sale with just a quick application, followed by instant approval. This provides personalized payment terms that suit their financial needs. Studies show that consumers, particularly Millennials and Gen Z, appreciate the flexibility of spreading payments over time. 52% of Gen Z and 60% of Millennials prefer alternative payment methods like consumer financing.

By offering point-of-sale financing, businesses allow customers to avoid hefty credit card interest rates and fees. This helps shoppers manage their finances more effectively while ensuring they immediately get the products they want.

Credit card interest vs point of sale financing

Credit card interest rates can range from 18% to 29.9%, creating a significant financial burden for consumers when they carry a balance. When people use more than 30-40% of their credit card limit, their credit score can start to decline, as credit bureaus see this as reliance on borrowed money rather than income.

Point-of-sale financing offers a much-needed alternative. With consumer financing, customers can avoid maxing out their credit cards and potentially improve their credit scores when timely payments are made. Instead of paying high interest, shoppers can opt for financing plans that offer fixed terms and lower rates.

Take Jill, for example. If she had used a multi-lender POS financing platform, she could have spread the cost of her washer and dryer over 6, 12, 18, or even 48 months with 0% APR. POS financing would have helped her budget and given her access to her purchase immediately—something layaway could not do.

How point of sale financing boosts sales

Offering point-of-sale financing benefits both consumers and businesses. Multi-lender consumer financing platforms can approve up to 85% of applicants in real-time, increasing sales by as much as 45%. Customers who have access to financing tend to spend more, adding additional items to their shopping carts. In Jill’s case, if she had been able to finance her washer and dryer through POS financing, she might have also bought a steamer and iron, increasing her total purchase value.

By providing flexible payment options, merchants can meet customer demands and create a more satisfying shopping experience. This increases the average order value and enhances customer loyalty, as shoppers appreciate the convenience and affordability of financing.

Adapting to the future of credit and consumer financing

As consumer expectations evolve, so does the way credit is offered at checkout. Shoppers are increasingly looking for flexible payment options to purchase items immediately without the burden of credit card debt. By incorporating point-of-sale financing into your business model, you can meet these demands and offer your customers the financial flexibility they want.

How credit is handled is changing, and businesses that adapt to these shifts will benefit from increased sales and customer satisfaction. Don’t miss out on the next wave of credit—make point-of-sale financing part of your strategy today.