Free Consumer Finance Retailer Insights Survey 2023

The rapidly evolving retail financing landscape presents new growth opportunities for merchants looking to expand their businesses.

Providing an omnichannel experience for consumer financing options is becoming increasingly important. With implementing a consumer financing platform a priority, it is crucial to manage the financing cycle and integrate with in-store point-of-sale systems. In this article, we will outline key points based on ChargeAfters’ Retailer Survey on the State of Consumer Financing related to retail financing and the implications for merchants in 2023.

 

 

What is in the Survey

Explore a range of retailer priorities on consumer finance, including:

 

Demand for Consumer Financing

Find out the importance of consumer financing and retailers’ take on consumer demand for POS financing.

 

Consumer Finance Approval Rate

In the survey, we assess the frequency of customers who walk away with a poor customer experience and lost revenues for the business and how statistics are a problem for near-prime and subprime customers.

Merchants find this information critical for expanding their financing options to remain competitive. Learn about the importance of Retail financing options such as in-store financing, checkout finance, and payment plans and how these can help merchants offer financing solutions that meet the needs of their customers.

 

Demand for Expanding Consumer Finance Lenders

Retailers want to serve the entire credit spectrum better and add to their lender portfolio. See how important it is for retailers to add B2B lenders, tertiary lenders (also known as a third-look lender), and secondary lenders to their financing portfolio.

The survey reveals how the drive to broaden the variety of options for consumers translates directly to improving the customer experience and revenues for the merchants, who are currently leaving money on the table.

 

Importance of Implementing Consumer Finance

End-to-end management of the financial cycle is crucial for financing platforms. Retailer insights reveal retailer priority on implementing a consumer financing platform and the range of essential considerations required, like, how the platform should manage the financing cycle, from reconciliations to chargebacks and dispute resolution, the ability to integrate with in-store Point-of-Sale, offering an omnichannel experience and connectivity to various lenders.

 

How vital is Consumer Experience & Omnichannel?

Providing omnichannel financing options is vital for most merchants, but smaller merchants must catch up. Today’s consumers often require an omnichannel experience when utilizing consumer financing and BNPL tools. The survey shows the importance of consumer experience and omnichannel from the retailer’s perspective.

The data paints a picture of consumer finance as an increasingly critical function in the business, linked to customer experience, revenues, and business growth. With technology investments and expansion a priority, merchants ask themselves – am I remaining competitive enough to support the business and my customers?

 

 

Conclusion

Download the FREE survey to gain insight into retailers’ demand for consumer financing, particularly for lower-priced items.

Find out what retailers need to improve customer experience and revenue and how crucial it is for merchants to provide an omnichannel experience for financing options. In the survey, learn how consumer financing is becoming an integral part of the customer experience, with some retailers creating a unique function for BNPL and consumer financing options.

As technology investments and expansion become a priority for merchants in 2023, they must remain competitive enough to support their businesses and customers. By understanding and addressing these critical findings in our survey, You can see how merchants can leverage the advantages of financing and capitalize on the growth opportunities offered by the rapidly evolving retail financing landscape.

3 Ways Retailers Combat The Changes In Demand For Consumer Financing

The way retailers construct their marketing strategies and how customers shop  have all been disrupted by digital technology, which is the main reason why the world of retail is very different today than it was just five years ago. Consumers now use their smartphones to see product reviews and compare prices. In other words, it is now a lot simpler for consumers to make informed  decisions. The same is true for the financial component. The form of funding the buyer chooses has altered as a result of the changes in consumer financing over the past few years.

 

For example, the usage of BNPL lending has increased drastically after the pandemic hit, and the trend is still going as BNPL has become a kind of habit for consumers:

BNPL retail purchases in the US

SOURCE: CORNERSTONE ADVISORS

 

As shopping patterns continue to change, let’s examine how brands may develop and apply next-generation marketing tactics to enhance the customer experience with different consumer financing options in the upcoming years.

 

Why Is Consumer Financing Necessary

Retailers struggle to select the best consumer financing option due to the wide range of options available. As the usage of consumer financing is increasing every year, it is impossible to have a successful business without it.

So why is consumer financing so important?

To increase sales – you can offer customers lower prices, promotions or discounts on your  products, but it’s becoming more attractive to consumers to pay full price  if they have the option to finance their purchase and split the payment. Using lending services has become a part of our merchant offering, and consumer lives.

In addition, clients can split payments over time without incurring any costs thanks to current financing solutions. Because of this, BNPL lending and POS financing are among the most popular types of consumer finance available today. Many times, even though a person has sufficient funds on hand, they  still choose to employ a BNPL or installment loan, for instance. There is a simple reason behind it, wise use of financing options increases their purchasing power and allows consumers to have an extra amount in their accounts to feel secure and be ready for any emergencies.

Because of this, funding choices are now available for products and services like furniture. home improvement, vacation, autoparts, education, and many more, as an integral part of the shopping experience.

 

The Increased Popularity Of Omnichannel Consumer Lending

Consumer financing has become more popular overall during the past ten years. More consumers frequently use lending services to obtain the funds required for shopping or unexpected expenses. According to the statistics, consumers favor BNPL loans or point-of-sale financing solutions. Consumer financing choices give consumers freedom, and if they’re used appropriately, they make it much easier for them to manage their finances. However, online financing isn’t the only instrument that can help the buyer have a positive purchasing experience. Customers who prefer local shopping or need a product that was nearly hard to select or purchase online required retailers to adjust to their needs.

For instance, if a customer wants to purchase a new mattress or any other type of furniture, they may want to physically inspect it to ensure that they are making the appropriate decision. Therefore, when a customer went to a store after seeing the retailers’ pleasant financing options online, they had to have the same financing experience there. For situations like that, retailers offer in-store financing. To provide the buyer with the same comfortable shopping experience, several furniture stores, including Raymour & Flanigan, are now leveraging the POS financing and BNPL lending features via an omnichannel  multi-lender platform.

 

Point-Of-Sale Financing

POS financing has evolved into one of the key tools for consumers, making it seamless to access flexible  lending options, , and younger generations are also the main customers here.

POS financing users by age

Source: TransUnion US Consumer credit Database

 

The fact that customers receive the quickest and coziest method of financing is one of the reasons the service has become so well-liked. It usually only takes a few seconds to apply and receive the funds you require when reputable third parties are involved. It also allows customers to receive the best financing options: Installments, Revolving loan, BNPL or LTO (Lease-to-Own) are amongst the most popular examples of financing.

 

Potential Problems For Retailers

Since the economy has begun to expand again in recent months, retailers have faced difficulties on both the top and bottom lines as a result of some sales growth that has slowed and margins that have shrunk. In the future, the industry will probably have to contend with a more difficult growth environment in addition to higher expenses. In addition to the rising cost of goods, retailers must also deal with increased costs for everything: from production inputs to freight, fuel, and labor. Although inflation hasn’t yet had a significant effect on nominal consumer spending, we are starting to notice the first indications of a future slowdown. Despite unprecedented inflation in the first quarter of 2022, US consumers kept their wallets open. Considering that US consumers had almost $3.3 trillion more in funds than they did in 2019, the increase in consumer spending was maybe not unexpected. Many people didn’t hesitate to use their savings when credit constraints loosened. And it hasn’t only been the savers who have been spending; credit card debt is also starting to increase.

Consumer financing is undergoing the same changes, so retailers are currently juggling two issues at once. Although the increase in prices and inflation has forced customers to use additional financing choices, it has also made them more anxious and made it more difficult to decide whether to apply for extra loans. Consumers are increasingly attempting to use financing services with caution and only select the ones they trust the most.

To ensure that customers are receiving the services they desire when they visit a retail website or physical location, retailers must now pay close attention to consumer behavior and implement innovative consumer financing features.

If retailers take risky, thought-out actions, they can turn these difficulties into opportunities. Businesses that do very well during recessions often outperform their competitors over the ensuing ten years

 

3 Ways Retailers Can Combat The Demand For Consumer Financing

1.    Be On Every Channel

 

According to TIDIO statistics, various customers utilize POS financing and BNPL in-store and online in different ways. Online services are not preferred by all customers. Some customers prefer to purchase goods and services from brick and mortar  establishments.

US Consumers shopping stats

 

This once more demonstrates the need for consumer financing solutions like POS financing or BNPL lending across all channels. Whether it will be for customers who choose to shop in-person at the neighborhood store or for online users on websites or mobile applications.

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2.    Offer Simple And Clear Financing

According to the findings of Citizens Point of Sale Survey, 76% of American consumers are more inclined to make a retail sale if a payment plan is supported by an easy and smooth point of sale experience. The survey found that 62% of respondents would like fixed monthly contracts with unambiguous payment terms, and a good understanding of how the sum will be paid off as the most crucial elements. Additionally, 66% of customers believe they already have sufficient credit cards and would rather avoid adding an additional credit card merely to make a large purchase. This suggests that customers seek a different option than applying for a new credit card to make a sizable purchase at a store. Retail brands can modernize their payment solutions by moving away from the store credit approach and adding simple financing options to their customers.

 

3.    Offer White-Labeled Consumer Financing

Consumers are flocking to private-brand products in the current market to combat inflation. Retailers should periodically reevaluate their category strategies in order to take advantage of this. Successful stores will strike a balance between fast-changing consumer tastes and pressures from individual inflation rates. This would need to reconsider their balance of national and private brands.

Consumers planning a major purchase viewed trust in the organization providing the financing and this is one of the main reasons they like branded lending platforms over independent FinTech firms. It demonstrates how retailer brands can profit from branded white-label financing solutions to attract more customers. As consumer financing has gained popularity, a wider range of independent businesses now provide these services.

Additionally, financing platforms like ChargeAfter, provide customizable white-label financing options. This allows the merchant to change the financing software however they see fit while still giving customers the financing options they need and demand.

 

Choosing The Right Consumer Financing Company For Your Store

Ready to provide your clients with immediate financing? Great! But which should you pick? It’s difficult to single out the top consumer financing providers because so many fintech firms provide BNPL products. Having said that, there are some qualities to consider while selecting a BNPL and consumer financing providers:

  • Positive customer experience: Businesses need to be able to deliver satisfying user experiences. For instance, ensure a smooth checkout experience would help prevent cart abandonment. Since over 80% of shoppers leave their carts empty before making a purchase, financing and BNPL ought to have superb integration to your customer journey. User-friendly features and no interruptions during checkout help decrease cart abandonment.

Card Abandonment reasons

  • Perfect payment plans: By offering a variety of payment options, retailers open up their products to more people, which can increase sales and brand loyalty. Customers and business owners alike can benefit from high flexibility. Any retailer can act as a lender thanks to financing platforms. A financing platform gives shoppers the freedom to choose their financing conditions based on sophisticated risk assessment models. Customers will be able to select from a variety of payment plans, without having to worry about not being approved.
  • Reduced risks: Flexibility and scalability are features that reputable consumer finance businesses can provide. You may increase sales, draw in new clients, and maintain existing ones by making it simple for people to finance the goods and services, but risk management should always be taken into account. Make sure to work with providers with low MDR (Merchant Discount Rate) and can provide the best interest rate for your customers. In addition, make sure the PoS financing solution of your choice has cutting-edge management including managing reconciliation, chargebacks and dispute resolution.
  • Helps you control Data: Lastly, reputable BNPL and PoS financing solutions ought to assist retailers in regaining control over consumer data in addition to streamlining payments. This would enable retailers to better understand what customers want, need, and like. Advanced financing solutions don’t just permit retailers to give clients financing options, but give the retailers the ability to safeguard user information, and build long-lasting relationships with customers.

 

Summary

In the end, we can say with certainty that consumer financing is still an evolving industry, and that brands must stay on top of emerging trends to ensure they offer the services that customers want. If not, retailers won’t be able to take full use of financing options. Therefore, we can conclude that both the retailers and the financing platform are involved in the process and that it is not a one-party job.

 

About ChargeAfter

ChargeAfter is a leading multi-lender platform for Consumer Financing. It connects businesses with the most reliable lenders, enabling them to offer customers the greatest financing solutions. With the best system of Waterfall Financing, ChargeAfter guarantees lending to every shopper, by matching the most relevant lender to every client. Using the unique consumer financing technology, ChargeAfter provides consumers with the best shopping experience. MUFG, VISA, Bradesco, BBVA, Synchrony, CITI Banks are among the investors of ChargeAfter.

How to get Embedded Finance Right

The coronavirus epidemic in 2020 and 2021 forced firms to reevaluate and speed up their digitization initiatives more than ever. Years-long planned digitization efforts were finished in a matter of months. These modifications will remain as we move deeper into 2023.

The fintech industry, in particular how established companies involved finance on a different level by integrating financial processes into their whole company plan, is one of the most famous examples of digitalization. With an expected market price of above $138 billion in 2026, it’s obvious that the embedded finance age is here to stay and not simply a passing trend in finance.

 

What is Embedded Finance?

It can be difficult to grasp what this term actually means for individuals who are just getting familiar with the idea, as it is with any new ideas. The use of financial instruments or services by a non-financial provider, such as loan or payment processing, is known as embedded finance. An electrical retailer, for instance, might provide point-of-service insurance for items purchased in-store.

Consumer financial processes will be streamlined through embedded financing, making it simpler for customers to access the services they require when they do. In the past, customers might have needed to physically visit a bank branch to request credit in order to make a significant purchase. Thanks to embedded finance, they can now do both at the same time at the point of service. ChargeAfter, Amazon’s EMI financing choices, Klarna, and Applepay are some of the best-known examples of embedded finance.

The simplicity of embedded finance for consumers is one of its main advantages. Customers could be more likely to finish a purchase and enjoy customer pleasure, which is crucial for fostering brand loyalty, if pain points experienced by consumers are eliminated, such as the requirement to seek credit elsewhere. Because customers are more inclined to buy something and return to do so often, firms may have the possibility to boost profits.

But ease isn’t the only benefit of embedded finance. It also serves as a tool for a greater understanding of consumers, their requirements, and their purchasing patterns. Later, this information can be used to motivate more corporate growth.

 

Five types of Embedded Finance

1.Buy Now Pay Later (BNPL)

Modern consumers are opening a new line of credit thanks to buy-now, pay-later services. Consumers are empowered to shop differently when they have access to a greater variety of items that can be paid for overtime, whether they decide to spend more on a newborn’s travel system or a higher-end piece of home equipment. The consumer is given the option to divide the payment in order to avoid large transactions

2.Point-of-Sale Financing

Integrated lending, goes a step further with loans. Businesses looking to fund larger or more substantial purchases can integrate these financial instruments. To be able to lend responsibly, they frequently need more information, such as information on creditworthiness.

In contrast to BNPL lending, POS financing offers a suite of financing products such as B2B financing, Installments, revolving line of credit and even lease to own. Additionally, the application process is more pleasant and the application form is simpler. POS financing has grown in popularity with omnichannel and brick and mortar-retailers. For instance, Raymour and Flanigan, one of the major furniture merchants, recently began collaborating with ChargeAfter to equip its retail locations and online business with point-of-sale financing.

3. Embedded Insurance

Customers may wish to make certain that, should the worst occur, their money won’t be wasted while investing in a new good or service. Integrated insurance comes into play in this situation. Businesses are in a better position to provide insurance fast by integrating insurance finance technologies.

4.Trading and Investment

Users can connect with their physical bank to make investments in a way that suits their current financial condition and spending patterns thanks to embedded finance capabilities in investment applications. This is an illustration of how a different sort of financial services provider has used embedded finance.

5. Fintech-as-a-service

A fintech API called fintech-as-a-service enables businesses, including non-financial ones, to integrate financial functionality into their current goods, services, and programs.

The use of financial technology-as-a-service products in a whole is growing, from billing to customer acquisition and all in between.

 

Using Embedded Finance

Creating an embedded financial strategy that meets their customer demands can be the first step for businesses. This entails assessing your digital requirements and choosing the tools you want to integrate. Identifying your company’s objectives for its integrated finance initiative is the first stage in that process.

These could include initiatives like enhancing customer service, expanding an existing clientele, or starting a new business to cater to a particular target market or demand. For instance, if you want to enhance client loyalty, one strategy to consider is embedded payment.

For some customers, a BNPL model might increase access to products or services. You could find it simpler to establish yourself as a one-stop-shop concept with embedded finance. But before choosing the best option, you must first be aware of your needs.

 

Connect Lenders and Consumers

If your business is a retailer, connecting consumers with a variety of lenders can also help you. For this reason, ChargeAfter developed a platform wherein a network of global lenders are assigned to any point of sales, connecting them to customers who want to finance.

In other words, ChargeAfter’s multi-lender P2P platform connects the three parties in a way that is mutually beneficial.

 

About ChargeAfter

ChargeAfter is a leading multi-lender platform for Point of Sales Consumer Financing. It connects businesses with the most reliable lenders, enabling them to offer customers the greatest financing solutions. With the best system of Waterfall Financing, ChargeAfter guarantees personalized lending to every shopper, by matching the most relevant lender to every client. Using the unique network and technology, ChargeAfter provides all parties, merchants, lenders, and consumers, with the best shopping experience. Phoenix, MUFG, VISA, Bradesco, BBVA, Synchrony, PICO Partners, CITI, Propel Venture Partners, Plug and Play, and other companies worldwide are among the investors of ChargeAfter.