Furniture POS Financing – Single or Multi lender

Did you know eCommerce surged 25% in the U.S. between March 1st and 11th? Adobe Analytics reports a 62% increase in the “buy-online-pickup-in-store” option from February 24th to March 21st as “shelter in place” guidelines were enforced nationwide. Online shopping has steadily gained retail market share over the past few years. With many retail stores now closed due to the COVID-19 pandemic, retailers are focusing on their digital presence and communication efforts. Retailers of mid and high-cost merchandise, such as those in the furnishings industry, are exploring single or multi-lender POS financing to keep their businesses growing.

One tool that can assist in maintaining high conversion rates and even lift average order values—always, especially during challenging times—is offering point-of-sale financing (POS financing). It’s an alternative payment method for shoppers. Instead of accumulating a large credit card bill, consumers receive financial solutions at purchase to help them buy goods or services. POS financing is a quick solution for mid to high-dollar value checkouts, dividing purchases into easy and affordable payments.

Understanding single lender POS financing

Are you aware of the distinct split within consumer point-of-sale financing? There are single-lender and multi-lender platforms. While this distinction might be invisible to consumers, it makes a significant difference for retailers. It can affect the percentage of consumers approved or declined for financing, the financing terms available, and the merchant’s conversion rates.

A single lender offering POS financing typically focuses on “prime” credit applicants, primarily interested in consumers with good to excellent credit. The strategy of single lenders is to serve consumers who pose the least risk, ensuring they’re more likely to repay their loans on time and specified terms.

While this strategy works well for single lenders, it can be limiting for merchants and consumers. Since they only approve prime credit consumers, single lenders decline around 70% of applicants. This can negatively impact conversion and cart abandonment rates. As a merchant in the furnishings industry, using a single lender may limit your ability to maximize conversion rates.

The benefits of multi-lender POS financing

Multi-lender point-of-sale financing platforms are a more recent development in retail financing. Unlike single lenders, these platforms connect merchants with a network of lenders, offering consumers a broader range of financing options. For instance, ChargeAfter is the first global network to provide a comprehensive solution to merchants for POS financing from multiple lenders. It collaborates with over ten lenders, constantly expanding its network.

At checkout, consumers complete a short, four-field application consisting of their name, address, social security number, and phone number. This application is processed through a “waterfall” of diverse lenders, catering to every credit type. The consumer is subsequently presented with personalized financing options. With this model, ChargeAfter enables merchants to achieve an 85% financing approval rate, significantly higher than what single lenders offer.

How the waterfall method enhances multi-lender platforms

The “waterfall” method is a critical feature of multi-lender platforms. It ensures that consumers receive the best possible financing terms by submitting their application through a tiered approval process. Here’s how it works:

1. Prime Lenders: Prime lenders first review the application. If the consumer is approved at this stage, they typically receive the most favorable terms.
2. Near-Prime Options: If prime lenders deny the application, it moves to near-prime or “second look” options. These lenders are willing to take on slightly more risk and offer financing to consumers with less-than-perfect credit.
3. Sub-Prime Lenders: If the applicant is still denied, the application is shared with sub-prime lenders, known as “lease-to-own” options. These lenders cater to consumers who may have poor or limited credit histories.

This multi-tiered approach allows for a wide range of rates and terms, giving shoppers more choices at checkout. Depending on the terms, consumers can select financing options that best suit their needs, possibly financing purchases over 6 to 48 months and even enjoying 0% APR.

Retailers who implement multi-lender POS financing platforms like ChargeAfter see substantial benefits. These include a 45% increase in average order value and a 35% increase in site-wide sales, making it a powerful tool for businesses looking to boost their e-commerce financing performance.

Choosing between single or multi-lender POS financing

Deciding whether to implement a single-lender or a multi-lender POS financing solution depends on your retail business’s specific needs and goals. Single lenders might suit merchants targeting a high-credit clientele and seeking a straightforward financing option. However, this approach can significantly limit potential customers, primarily if your business serves a diverse demographic with varying credit profiles.

On the other hand, a multi-lender platform opens up the possibility of serving a broader customer base. By leveraging a network of lenders, you can offer financing solutions to various consumers, from prime to subprime credit applicants. This inclusivity can lead to higher approval rates, reduced cart abandonment, and increased conversion rates.

Implementing multi-lender POS financing for maximum impact

If you decide to go with a multi-lender POS financing platform, integrating it into your business can be seamless. Most embedded lending platforms offer simple integration options, whether you’re incorporating it into an eCommerce site or an in-store POS system. For retailers looking to create a consistent and branded experience, white-label BNPL solutions are an excellent choice. These solutions allow you to offer financing under your brand name, enhancing customer trust and loyalty.

Another essential aspect is the adoption of omnichannel financing. By providing in-store finance alongside online embedded lending, you ensure your customers can access financing options no matter where they shop. This unified approach caters to modern consumer behaviors, where customers may browse online and complete their purchases in-store or vice versa.

How single or multi-lender platforms affect customer experience

The choice between single or multi-lender platforms plays a significant role in shaping the customer experience. Single lenders may provide a streamlined process but limit the flexibility and options available to shoppers. This can lead to a higher cart abandonment rate, notably if consumers are declined for financing due to stricter credit requirements.

In contrast, multi-lender platforms offer a more flexible and inclusive approach. By working with a network of lenders, they can accommodate a broader range of credit profiles, providing more options for shoppers. This flexibility improves the likelihood of completing a sale and enhances customer satisfaction, as shoppers are more likely to find a financing option that suits their needs.

The future of POS financing in the retail sector

As the retail landscape continues to evolve, POS financing is becoming vital for businesses looking to remain competitive. The choice between single or multi-lender platforms will shape how effectively you can cater to your customers’ financing needs.

Retailers can offer a more inclusive and flexible financing solution by choosing a multi-lender approach and incorporating an embedded finance platform. This approach increases approval rates and enhances the overall customer experience, leading to higher average order values and increased sales.

Conclusion

Incorporating POS financing into your retail strategy can be a game-changer, especially in industries like furnishings where high-ticket items are standard. While single-lender solutions may serve a niche market, multi-lender platforms provide a more inclusive and effective way to meet diverse customer needs. Integrating embedded lending networks into your POS system offers a seamless, branded financing experience that drives customer satisfaction and boosts your bottom line.

Choosing the right POS financing platform will set the foundation for a more prosperous future in retail. It will allow you to meet evolving customer demands and stay ahead in a competitive market.