Credit has Revolutionized

Mar 11, 2020

Did you know that point of sale financing has been around for over 80 years?

Throughout that time, technology has been key in helping checkout financing reach new potentials. It has improved the shopping experience for consumers. A more seamless purchasing experience for shoppers means a boost in customer loyalty and morale for you!

Let’s first talk about one of the most popular points of sale financing models which are still used by some merchants today. The layaway model. It emerged in the early to mid-1900s, it was popular in stores such as Macy’s and Sears. Customers typically used the layaway model for household appliances and/or luxury items. Layaway programs may seem like a foreign term, but it is a purchasing method where the customer places a deposit on an item for pick up at a later time. For example, Jill’s washer and dryer started making funny noises, her washer no longer drains the water and the dryer, well it’s not drying. It’s time for a replacement set! When Jill shops at Sears the price tag reads, $1,398 for a new Samsung washer and dryer combo. There is no way Jill can pay for this upfront, instead, she chooses a layaway plan. With this plan, Jill puts a $300 down payment. Jill still cannot take the washer and dryer combo home, but they will remain on hold until she is able to pay off the entire amount. After making continuous payments every two weeks for 8 weeks Jill is finally able to take the new washer and dryer home! As you can see the layaway plan works but customers are unfortunately not able to use their products immediately.  As the ubiquity of credit cards emerged, layaway programs started to fade due to convenience.

Another attempt at POS financing that companies still participate in today are co-branded cards, private label cards, and core sales finance cards. Co-brand cards are primarily used to promote rewards and loyalty programs, which can be used both at the specific retailer and anywhere the network is accepted. Private label cards are used to promote rewards/loyalty programs, and can only be used at a specific retailer. Core sale finance cards are offered to customers as a method to finance a transaction and are mainly used for big-ticket retail sectors such as jewelry, furniture, technology, and motor-sports. There are limited rewards, and the cards are used mainly to promote finance. You may have come across some of these types of cards, examples include Delta Skymiles, Macy’s Rewards Cards, Amazon Rewards Visa Signature Card, Victoria’s Secret Angel Credit Card, and Best Buy Credit Card. Options have traditionally been limited to a plastic card for those who cannot outright pay for a good or service but that is now changing as more point of sale financing platforms are emerging. 

Credit is a cornerstone of American society. It can be very easy to swipe a credit card and instantly purchase a good or service, well, depending on the price tag of course! POS financing allows consumers to purchase mid to big-ticket items a lot easier. At the point of sale, customers submit the financing application which only takes a minute to fill out, then approval happens almost instantly, and at last personalized finance terms are set.  Out of the many studies completed, there has been a common ground: Consumers appreciate the flexibility of paying for purchases over time. Business Insider reported that in particular, 52% of Gen Zs and 60% of Millennials prefer to use alternative payment options like consumer financing. These consumers, in particular, have experienced some of the great pitfalls that having debt entails. They have lived through the global financial crisis of 2008 and the roaring increase in college tuition. They have seen what credit card debt can do to those trapped under it. Their parents (Baby Boomers in most cases) have accumulated more debt than any other generation. Most Millennials and Gen Z shoppers have seen and heard the cautionary tale of credit cards and want to continue to avoid debt. By offering your consumers financing at the point of checkout, they are able to pick loan options with set payback dates that fit their individual needs all while getting the products and services they want immediately. 

Did you know credit card interest rates range from 18 – 29.9%? 
When a person has utilized more than 30 – 40% of their credit card limit, the credit score starts to decline because credit bureaus see the consumer is reliant on credit instead of hard cash or debit.  Consumer financing is an alternative option to assist with the stress of having to pay for big purchases upfront with a credit or debit card. It can in turn help customers’ credit scores when payments are completed on time. 

Let’s talk about Jill again. If she had the option to finance the washer and dryer at the point of sale, through a multi-lender consumer financing platform, she would have been able to finance the products over a period of 6, 12, 18 and even 48 months with equal payments, all while having 0% APR. Multi-lender platforms are unique because they have the capability of offering personalized loans due to a network of global lenders. Merchants can approve up to 85% of their applicants in real-time and increase sales by up to 45%. Think about it, Jill may have even decided she wanted to additionally purchase a new steamer and iron. If Jill had the option to use POS financing, she would have been able to increase her order value by adding more items to her cart and even better, she has the satisfaction of utilizing her products immediately all while having a fixed payback plan that meets her unique needs. 

Customers are demanding choice and appreciate the flexibility merchants offer through the point of sale financing. Not only does it benefit consumers but it will benefit your business just as much. The way credit is handled is revolutionizing. It’s time to plan for the changing consumer landscape by incorporating checkout financing into your business model. Don’t miss out on the next wave of credit.

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About the author
Chris Lloyd
“ChargeAfter is amongst our top rung of partnerships, and they enable us to deliver consistent. The conversion uplifts ChargeAfter creates helps drive strong value for DXL Group and our customers.”