Point of Sale Financing is here
Credit cards, Paypal and other traditional payment methods have offered shoppers many advantages over the years. They’ve allowed consumers to buy now and pay later, granting them access to goods and services that may have otherwise been unattainable. As global usage of credit cards continues to decline, this has created a high demand for point of sale financing to be adopted by multi-channel merchants and retailers.
Here are two quick examples demonstrating the benefits of using point of sale financing during a shopping experience.
Kim is now a senior in college. She takes care of herself financially and her laptop completely gave out on her. It won’t turn on, it is done! She is in desperate need of a new one. Kim typically uses her credit card for emergency situations like this one. Her credit card limit is $5,000. So far, she has utilized 25% of her credit card meaning, she only has $3,750 left in credit. The laptop she wants is a 13” MacBook Pro with Touchbar and TouchID costing $2,000! This means that after purchasing the laptop, Kim will end up utilizing 75% of her credit card. With the credit card balance now being so high, Kim is not really sure when she will pay off her debt. It may take a year, it may take two years, it may take three years. Interest rates average from 18 – 29.9%! The longer the payments are dragged out the more interest she will end up paying and her credit score will take a beating. Kim now has to deal with the fixed terms her credit card company has set for her. Are you aware of how much interest you pay on your credit card? Point of sale financing offerings are very transparent, they inform consumers of their interest terms, the time period they have to pay off their financing loan and when the monthly payments will be due.
If Kim would have selected to make a purchase with point of sale financing, she would have not maxed out her credit card, her credit score would not have been affected and, she likely would of paid 0% interest. In case of a rainy day, Kim would still have her credit card available for emergency use. This is part of the power of offering point of sale financing to your consumers. An additional and immediate benefit is that businesses who offer point of sale financing on average see a 44% increase in AOV and a 30% increase in site wide sales.
Ron is in a similar situation, except Ron is in need of an additional laptop for gaming. A fun fact about Ron is that apart from his day job, he is a competitive Esports athlete. Currently, Ron’s credit card limit is $8,000. So far Ron has only utilized 15% of his credit card, which means Ron has a remaining balance of $6,800. The computer Ron wants to purchase is an MSI GT83 Titan which costs $5,230 – that’s a lot of money! Instead of purchasing the computer on his credit card and having his credit card utilization reach 80%, at checkout, Ron selects point of sale financing as an alternative payment method. The best part is that filling out the application, the approval and, Ron’s selection of a personalized financing option took less than 1 minute of his time!
At checkout Ron was presented with the option to finance the computer over a period of 6, 12, 18 or 48 months! He chose 18 months as it best fits his financial needs. The monthly payments will only be $290.55 with 0% APR! Ron is happy because he does not feel the pressure of having to pay so much money upfront, he is able to budget. Better yet, his credit will be positively affected and Ron still has 85% of his credit card balance remaining for a rainy day.
With the flexibility point of sale financing has to offer, it is easy to understand why consumers are more drawn to alternative payment methods. There are accommodating terms, controlled payments, a set pay-off date, 0% interest rates, and it does not impact credit scores in a negative manner as long as the terms are met. The fact that consumer financing is a form of a personal loan, means the individual’s credit score will actually rise with set on-time payments.
How much better can it get?
POS financing benefits merchants because it encourages shoppers to make higher purchases by utilizing a line of credit that is not associated with their credit cards. It’s personalized. As shoppers are becoming more mindful of their purchases, point of sale financing offers them the choice and flexibility they need whether it’s for everyday needs or high-value items.