Single Lender vs. Multi-Lender Point of Sale Financing

The world of consumer point-of-sale financing has a distinct split between single lenders and multi-lenders. To the consumer, this distinction is almost impossible to spot. For retailers, it makes a big difference. Single vs. multi-lender platforms can have a huge impact on who gets approved for financing or not, what terms are available, and what sales look like.

Single lenders

Single lender platforms typically focus on “prime” credit applicants. These are consumers with excellent to good credit and the most favorable variables working for them, such as a good credit history, high income, and low or no existing debts.

These lenders — Affirm, Bread, and others—use specific credit underwriting terms to target prime consumers. Single lenders also act as banks and usually have one source of fund distribution. This means their risk is higher due to their focus on prime borrowers. Anyone not fitting the “prime” mold is usually denied, which means turning away roughly 70%~ of applicants to focus on the top 30%~.

There’s nothing wrong with this strategy for lenders—they’re targeting people most likely to pay back their loans! For (e-commerce) merchants, however, this impacts sales. Customers outside the prime category may not qualify despite their apparent ability to repay their loans. Likewise, denied shoppers may abandon their carts altogether to shop elsewhere. Abandoned carts skyrocket, conversion rates fall, and missed opportunities abound.

Multi-lenders

Multi-lenders (like ChargeAfter) use a network of financing options funneled through a single-user checkout experience. Customer data isn’t processed against uniform terms targeted at prime applicants. Instead, it’s put through a “waterfall” of diverse banks, with various financing options for the consumer at approval.

The waterfall method is a straightforward and efficient process. A consumer point-of-sale financing application is first checked against the prime lenders for approval. If the application is declined, it then moves down to near-prime options. From there, sub-prime options are explored, and so on, all the way down to lease-to-own financing options. All of this is done in one single application, with results back in under 2 seconds!

Because multiple bank lenders are checked in the waterfall, different rates and terms are available to shoppers once they are approved, allowing them to pick the best-personalized offer for them at checkout.

ChargeAfter provides an up to 85% approval rate for applicants by enabling merchants to offer more financing options and allowing shoppers to receive and select the right choice for them!

Single Lender vs. Multi-Lender

When comparing single-lender and multi-lender platforms, the difference lies in the range of financing options and approval rates. Single lenders focus on prime consumers, offering competitive rates but excluding many applicants who fall outside their strict credit criteria. This exclusionary approach can lead to higher cart abandonment rates and fewer conversions for merchants. Multi-lender platforms, on the other hand, use a more inclusive waterfall method, presenting diverse financing options from multiple banks. This strategy increases approval rates and ensures more consumers can secure financing, ultimately boosting sales and merchant satisfaction

The effect on eCommerce

As mentioned, denying a shopper access to financing can have disastrous results for abandoned carts, conversions, and even customer loyalty. However, giving borrowers more flexible repayment options cannot only encourage checkout confidence but also lead to higher average order values (AOV) at checkout. This optimistic outlook can inspire retailers to consider the potential benefits of multi-lender platforms.

More people are shopping online than ever before. Big-ticket items are more available, too. As a result, it’s in the best interest of online retailers to bring their customers diverse financing options to meet all credit types. Choosing a multi-lender platform means casting a broader net for interested shoppers and bringing in more sales. You’ll also turn away fewer potential borrowers who can improve their financing.

In an age where it’s easier to buy an armchair online than going to a physical furniture store, eCommerce stores need the inclusivity that multi-lenders offer. Not everyone has pristine credit, but that shouldn’t disqualify 70+% of shoppers seeking consumer loans. Multi-lender platforms provide a more considerate approach, ensuring that a wider range of shoppers can access the financing they need.

Conclusion: Optimizing Sales with Single Lender vs. Multi-Lender

Choosing between single-lender and multi-lender platforms can significantly impact a retailer’s success. While single lenders may work for prime customers, limiting approval rates and excluding many potential buyers can hinder growth and increase cart abandonment. With their inclusive waterfall approach, multi-lender platforms open doors for a broader range of consumers, enhancing approval rates, improving customer satisfaction, and boosting overall sales. By offering diverse financing options, retailers can meet the needs of today’s varied credit profiles and maximize opportunities in an increasingly competitive market. Adopting a multi-lender strategy is a forward-thinking move promoting inclusivity and growth in the digital retail space.