Maximize every sale opportunity with point of sale financing

Apr 2, 2020

Maximize every sale opportunity with point of sale financing

Furniture is the backdrop to our lives, it enhances the space we live in while communicating our attitudes and personality. Until recently, shoppers felt the need to go to a physical store when purchasing big-ticket items such as beds, couches, desks and more. That, however, is changing due to the ease and growth of eCommerce. Are you aware 81% of consumers start their shopping journey online? The internet allows consumers to research, compare, and purchase products anywhere they are in the world. With the rise of eCommerce, traditional in-store point of financing has also moved online. 

Point of sale financing, also known as POS Financing, checkout financing, consumer financing, micro-financing, and point of sale lending or “buy now pay later” is beneficial to all parties involved. It is an alternative payment method for consumers. Instead of racking up a huge credit card bill, consumers are able to receive financial solutions at the point of purchase in order to assist them in buying the products or services they need. Point of sale financing is a quick solution for mid to high dollar value checkouts and dividing a purchase into easy and affordable payments.

Benefits for merchants who offer point of sale financing to their consumers include:
-Positive customer experience
-Higher conversion rates
-Increase in AOVs (average order value)
-Widen customer base
-User-friendly experience

Consumers are favoring their debit cards, they are well aware of the burden credit cards can demand especially when considering interest rates vary from 18-29.9%. Are you aware that once a consumer surpasses the 30-40% utilization mark of their credit cards, the credit score starts to decline because credit bureaus notice the consumer is reliant on credit instead of hard cash or debit? Point of sale financing helps remove friction for shoppers who struggle to qualify for personalized loans or who do not have the desire to apply for or use credit cards. Point of sale financing is a form of personal loan that is not associated with a consumer’s credit card, so credit scores will actually rise with set on-time payments.

Did you know there has been an increase in short-term installment loans within the last 3-5 years? Visa’s chief economist states he is, “seeing a massive increase in alternative lending,” about 70% of purchase installment loans are short-term. Only lasting on average anywhere between 3 – 12 months. It’s understandable why 74% of US cardholders think installment plans are helpful for budgeting and 70% think it helps alleviate the stress of making a large purchase upfront. Point of sale financing enables a stronger relationship between merchants and consumers. 

Take a look at this example: 
John just moved into a new home and is ready to invest in some furniture. He is not in financial distress but he likes to strategically shop to select items that fit his needs and budget. The first thing John wants to splurge on is his home office, he adds a Moon Rock Gray Sutherland Chair to his cart with a price of $243. The next two items John adds to his cart is a Boutwell Velvet Square Arm Sofa costing $733, and a U-Shape Executive Desk costing $790. His total is currently at $1,766. At checkout, John was planning to put the total amount on his credit card, however, he’s already feeling hesitant as the items he chose are more expensive than planned. John’s credit card utilization is already at 25%, not to mention his interest rate is 23% considering this is the very first credit card he’s had. John thinks about taking an item off his shopping cart but he notices the merchant offers financing as a way to complete the purchase, immediately John is intrigued. He selects the alternative payment option instead. John fills out the short financing application, and finally once approved personalized financing options appear. All of this took about one minute of his time! John has the option to finance his purchase between a period of 6 – 48 months, he selects the 12-month financing option, meaning, the monthly fee comes out to be $147 with 0% APR! John decides the total is not bad at all, so he continues his shopping journey due to the accommodating terms the merchant is offering. John ends up selecting three Pine Lake reading floor lamps for $65 each and a Filipek coffee table for $140. The customer’s total now reaches $2,101.  John continues with point of sale financing as his payment method, he keeps the financing terms at 12 months so the monthly fee will now only be $175. 

In the example provided, John is ecstatic because he was able to purchase more items than he originally planned for due to the financing option available at checkout. John didn’t have to use his credit card so he has funds remaining for a rainy day and he will not have to worry about high-interest fees. Point of sale financing allowed John to have a personalized payment plan. The customer is able to receive his products without any hold-ups and the merchant is happy because of the increase in order value. 

Did you know that merchants who offer point of sales financing to their consumers see a 32% increase in average order value? In fact, merchants who offer point of sale financing from a multi-lender platform like ChargeAfter enjoyed a 45% increase in AOVs and a 35% increase in site-wide sales. 

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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.”