How Flexible POS Consumer Financing From ChargeAfter Can Open The Door To New Customer Segments

There is a massive customer segment that is grossly overlooked, and it is a segment that is only growing. The subprime consumer – or those customers who don’t have access to credit or an established credit score. Normally, this is a segment that most retailers don’t take into consideration, and why should they? How can you be sure they can actually afford your product and they are more likely to make a one-time purchase if and when they purchase your service or goods. 

However, consumer behavior is continuously changing and according to statistics, 50% of Gen Z – the consumers who are quickly becoming an important segment in the market, have a prime credit score and a credit card with an average utilization rate of around 31%. So what about the other 50%? The percentage that doesn’t have an established credit score or who simply doesn’t want credit cards? This is the segment that poses a wonderful opportunity for merchants to not only increase their sales but also improve customer retention rates. 

Here’s how Buy Now Pay Later consumer financing from ChargeAfter can help you tap into this market.

The Subprime Customer – Who Are They?

Subprime customers are typically those who have a harder time getting approved for credit or loans from prime lenders because their credit scores are “fair”, or below average.

The higher your credit score, the easier it is to gain access to things like credit cards, short-term loans, and mortgages. Unfortunately, those who do not have a well-established credit record or a low credit score have a much harder time securing loans for houses, cars or getting approval for rentals and store or credit cards. 

Why Do Subprime Customers Matter?

The simple answer is that it is an untapped market that not only helps to increase your bottom line but also creates an opportunity for you to build a lasting customer relationship, one they might not be able to find in many other stores. 

A subprime customer doesn’t necessarily mean that they don’t earn as much as a prime or near-prime customer, it may just be that their credit scores are not above average because they haven’t built up a credit history yet. They are usually seen as high-risk buyers but research shows that the average income for a subprime consumer is around $70,990, whereas a prime lender customer is around $79,834 – only a few thousand dollars difference between the two. The same can be said for the debt the average subprime customer has accrued, which is $6,489, whereas the average prime or near-prime customer has accrued $6,194 – a minor difference of a few hundred dollars.

They may seem riskier when it comes to offering financing or personal loans, but looking closer at the numbers, the statistics show that they are not that far off from the consumer average.

How To Tap Into This Market With Buy Now Pay Later From ChargeAfter?

These customers may be turned away by prime lenders, but ChargeAfter’s waterfall financing network enables you to find the best terms and financing options for these customers. The ChargeAfter waterfall financing model works by connecting your customers to a multitude of prime, near-prime, and subprime lenders. Applicants are funneled through the waterfall and matched with the perfect lender that has terms and conditions suited to their needs. Instead of turning away customers that seem high risk to prime lenders, you can connect them to lenders who are willing to finance their purchases from your store. 

Since ChargeAfter’s technology uses multiple lenders, the consumer approval rating for Buy Now Pay Later financing is over 85%, whereas other single lender BNPL service providers only have a customer approval rate of between 60% to 65%.

This means that by using ChargeAfter as a BNPL service provider, you can get up to 20% more BNPL financed sales than if you were to use other single lender financing service providers. 

The Bottom Line

Despite being considered “risky borrowers”, subprime lenders make up a large portion of a viable market. By offering them waterfall consumer financing from ChargeAfter, you open the door for more opportunities to build a new customer base, increase your bottom line, and give your customers the chance to establish a healthy credit history.