Tag: Omnichannel

The Transformative Power of Embedded Lending in Customer Journeys

Posted on by ChargeAfter

The retail industry has successfully navigated a period of uncertainty in recent years. Retailers have improved every step of the customer journey by plugging into technology to respond to challenges such as the COVID-19 pandemic and supply chain disruptions. Shoppers today enjoy a better, more personalized customer experience than ever before. We can buy goods and services online or offline, choose to have our purchases delivered in two hours or two days, buy “off the shelf” or customize our purchases – whatever suits us best.

However, during this era of inflation and high interest rates, retailers have a new struggle: providing choice and personalization in consumer financing.

The Evolving Landscape of Consumer Financing

For most of the last half-century, credit cards have been the primary solution for purchase financing. Analysis by McKinsey states that credit cards remain the most popular unsecured borrowing in the United States. Credit card borrowing accounts for 78% of balances, with a 10% growth in transaction volumes in recent years, contributing to transaction values of $49 trillion in 2021.

However, the credit card is beginning to slow as a legacy solution. Traditionally, the credit industry has worked around, rather than with, the increasing segmentation of borrower profiles. Significantly, this limitation is manifesting in the form of a demographic gap. Research commissioned by GlobalData revealed a marked rise in the percentage of under 35s not possessing a credit card — 47% in 2022, compared to 39% in 2016.

Instead, younger and underserved shoppers are adopting point-of-sale loans embedded in the customer journey as an alternative to credit cards. These demographics enthusiastically embraced Buy Now Pay Later (BNPL) as an attractive alternative for consumer financing. BNPL offers convenience through competitive APR rates, predictable repayment schedules, and flexible approval requirements. However, it has its limitations. Originating from the fintech industry, new regulations by the Consumer Financial Protection Bureau threaten BNPL providers as loan defaults grow.

Additionally, this type of loan is only suitable for small-ticket items. Shoppers need an alternative to finance big-ticket purchases such as furniture, electronics, home improvement, jewellery, etc. And while plenty of other lending products are available for these purchases, retailers struggle to offer their shoppers a choice of financing options at the point of sale.

The Challenges of Existing Embedded Lending Frameworks

Embedded lending is experiencing rapid growth, with market revenue reaching US$4.7 billion in 2021 and projected to rise by US$32.5 billion in the next decade. However, given the complexity of embedding multiple lenders into omnichannel customer journeys, currently, most retailers offer a single-lender solution.

This single-lender model limits retailers’ ability to provide financing options that cater to their customers’ needs and preferences. Lenders typically specialize in specific financing products, such as installments, 0% APR, BNPL, lease-to-own, etc., targeting specific customer segments – prime, near-prime, or subprime. This limited financing focus leads to poor approval rates, abandoned carts, lost sales, and customer dissatisfaction. Furthermore, relying on a single lender exposes retailers to the risk of changing lending conditions, especially as lenders tighten their underwriting strategies and approve lower approval rates and transaction values.

Retailers know this, and many attempt to integrate a second lender into their offer. However, this approach results in a heavy lift for the retailer and a poor and fragmented experience for the customer.

However, this is changing. The technology enabling retailers to embed multiple lenders into omnichannel customer journeys is now available.

An increasing number of retailers are embracing a platform-first approach to point-of-sale financing.

Unlocking the Potential of Embedded Lending in Customer Journeys

Given the difficulties in managing multiple lenders, retailers are adopting a platform-first approach quickly. ChargeAfter’s embedded lending platform enables retailers to easily configure a waterfall of lending options that address all credit profiles from credit-invisible to super-prime and everything in between into omnichannel customer journeys.

This model benefits all of the players in the ecosystem. Retailers offer flexible financing options to customers at their moment of need, resulting in up to 85% approval rates, increased sales, higher average order value (AOV), and improved customer satisfaction and loyalty. Shoppers access financing choices from trusted lenders, enabling them to purchase the goods and services they desire with the terms and conditions that best suit their needs and preferences. Lenders, in turn, gain direct access to customers needing their services. This comprehensive solution creates a win-win-win situation for the entire consumer financing ecosystem.

About Kevin Lawrence

Kevin has worked in the banking and finance industry for over a decade. He has worked closely with some of North America’s largest banks and financial institutions and retailers. Kevin is an expert in embedded consumer financing, with a deep understanding of current trends and where the industry is heading.

Empowering Consumers: A Review of Point-of-Sale POS Financing Products for Retailers

Posted on by chargeafterdev

In the dynamic world of retail, Point-of-Sale (POS) financing, a type of embedded lending, is proving to be a game-changer. Its rapid growth mirrors shifting consumer needs and reflects the changing landscape of the retail industry. According to Future Market Insights (FMI), the embedded lending market, including POS financing, will exceed $32.5 billion by 2023 due to the rapid adoption rate of fintech solutions.

Traditional credit card usage is significantly slowing as younger consumers seek more flexible and accessible alternatives. Unlike the conventional one-size-fits-all approach of credit cards, POS financing platforms offer tailored solutions that cater to the unique needs of different customer segments. The result? A shift towards more versatile financing methods, particularly among younger and underserved shoppers.

Embedded finance solutions come in various forms, each with its unique benefits. From revolving lines of credit that offer a set borrowing limit that businesses can repeatedly tap into to the allure of 0% APR programs that promise zero interest for an introductory period, these POS financing options are as diverse as they are flexible.

Furthermore, Buy Now Pay Later (BNPL) programs have emerged as a popular short-term installment solution. Offering an easy-to-understand structure, BNPL allows consumers to purchase goods immediately and pay for them over time, making the entire process hassle-free. Similarly, the lease-to-own concept has found favor, particularly for subprime borrowers seeking to purchase high-priced items such as appliances, furniture, and electronics.

Types of Retailers Using POS Financing

Retailers in many verticals are adopting POS financing and making it a strategic priority given its flexibility and conveniences. As inflation continues to impact customers, demand for POS financing is rising. According to ChargeAfter data, demand for point-of-sale financing increased by 55% in the first quarter of 2023, compared to the same period in 2022. Retailers benefit from offering a robust POS financing experience that meets the needs of all of their customers, especially those selling big-ticket goods or services that are purchased infrequently. In 2023 retailers that are prioritizing upgrading their POS financing offers include:

E-commerce Stores

Online retailers often use POS financing as it can easily be integrated into their checkout process. This allows consumers to choose a financing option at the point of purchase. However, it’s important for many retailers to offer an omnichannel financing experience. 

Electronics Stores

Given the high price of many electronic items such as televisions, laptops, and smartphones, electronics retailers often offer POS financing to make these purchases more affordable for consumers. Customers need to be able to access financing both in-store and online, depending on how they prefer to shop. Additionally, as many electronic retailers serve businesses, they also need to consider B2B financing in their POS offer.

Furniture Stores

Similar to electronics retailers, furniture stores often sell high-ticket items that can be out of reach to many. POS financing can help increase sales and average order value by making these items more accessible to consumers. Retailers need to consider offering an omnichannel financing experience including pre-approval online before visiting a store. They also benefit from offering financing options that cover a range of customers according to different credit scores. 

Home Improvement Stores

Stores that sell appliances or home improvement goods like hardware and construction materials often use POS financing. These items can range in price and financing allows consumers to make these necessary purchases more manageable.

Healthcare Providers

Healthcare and beauty business provide elective surgeries and other costly procedures. They make their treatments accessible to more people when they offer POS financing. By offering POS financing, healthcare providers democratize services that were previously out of reach to many. 

Automotive Dealerships

Dealerships often use POS financing when selling and repairing cars. They may offer financing options, from traditional auto loans to lease-to-own options.

Jewelry Stores

Given the high price of jewelry, these retailers often offer POS financing to make purchases more feasible for consumers.

Types of POS Financing Products

By offering different types of financing products at the point of sale, retailers  meet the needs of more customers.

Revolving Credit Line

A revolving line of credit is a flexible loan arrangement between a financial institution and a customer that establishes a maximum loan balance that the lender permits the borrower. It allows the borrower to use funds up to a set limit and repay them, potentially over and over again. Unlike a traditional loan, where the borrower receives a lump sum upfront and starts paying it back in installments, a revolving line of credit lets the borrower withdraw funds up to the set limit as needed. Interest is charged only on the borrowed amount, not the entire credit limit. Once the borrower repays any portion of the borrowed amount, that portion becomes available again for future use. This “revolving” structure gives the borrower the flexibility to manage their borrowing and repayment schedules within the agreed terms. A typical example of a revolving line of credit is a credit card, where the cardholder can spend up to a specific limit, repay the balance, and then spend again.

Long-Term Installment Loans

Long-term installment loans are loans that borrowers repay over a set number of scheduled payments or installments over an extended period. Depending on the loan agreement, this period can range from several months to several years. Long-term installment loans can be secured or unsecured. Secured loans require collateral, such as a house or a car, and typically have lower interest rates because the lender can seize the collateral if the borrower defaults. Unsecured loans, which are provided at the point of sale, do not require collateral but usually have higher interest rates to compensate for the increased risk to the lender.

The terms of long-term installment loans, including the loan amount, interest rate, and repayment schedule, are typically determined at the outset and spelled out in the loan agreement. Each installment payment reduces the principal amount owed and covers the interest on the debt, making these loans easier to budget for than revolving credit lines, where the minimum payment can vary. Long-term installment loans are often used for major purchases or investments, such as buying a house (mortgage), buying a car (auto loan), or funding higher education (student loan). They provide borrowers with the means to afford big-ticket items and significant expenses they couldn’t cover upfront, spreading the cost over an extended period.

0% APR

0% Annual Percentage Rate (APR) refers to a promotional interest rate offered by lenders where no interest is charged on the principal amount for a specified period. This period can range from a few months to a few years, depending on the terms set by the lender. Often seen in credit cards or auto financing, this offer allows borrowers to finance purchases or transfer balances from high-interest accounts without accruing additional interest during the promotional period.

It’s important to note, however, that once the promotional period ends, any remaining balance starts to accrue interest at the regular rate as defined in the terms of the agreement. Moreover, 0% APR offers usually require the borrower to have good to excellent credit, and the terms may stipulate that if a payment is missed or late, the promotional rate ends prematurely, and a higher interest rate applies. It’s, therefore, crucial to understand the terms and conditions attached to a 0% APR offer before proceeding.

Buy Now Pay Later (BNPL)

BNPL, or Buy Now, Pay Later, is a type of short-term installment financing that allows consumers to purchase goods or services immediately and pay for them over time. Typically, payments are made in fixed installments over a set period, such as weeks or months. One of the main attractions of BNPL for consumers is that, in many cases, these payment plans do not incur high interest or fees, provided payments are made on time. Some BNPL services offer 0% interest financing if the balance is paid within a specified promotional period. This can make BNPL more affordable than traditional credit cards for some consumers, particularly for more expensive purchases.

Consumers need to understand the terms of their BNPL agreement. Late fees may apply if payments are not made on time, and interest may be charged on the remaining balance. In some cases, if the balance is not paid off by the end of the promotional period, interest may be charged retroactively from the purchase date.

BNPL has seen a surge in popularity in recent years, particularly among younger consumers, and is now offered by a wide range of online and physical retailers. Typically BNPL is used for small-ticket items with a value of between $50 and $1000 (Consumer Financial Protection Bureau). Based on five surveyed lenders from 2019 to 2021, BNPL loans grew by 970%, from 16.8 to 180 million. The dollar volume grew by 109%, from $2 billion to $24.2 billion.(Consumer Financial Protection Bureau). 

Lease To Own

“Lease to own”, also known as “rent to own”, is a type of agreement that allows a customer to lease a product with the option to purchase it at the end of the lease term. This financing option is typically used for expensive furniture, appliances, vehicles, and electronics for subprime customers. The customer makes regular payments over a specified period in a lease-to-own agreement. These payments contribute toward the total purchase price of the product. At the end of the lease term, the customer can buy the item for either a small residual amount or the sum of the remaining unpaid purchase price.

The advantage of a lease-to-own agreement for customers is that it allows them to use and enjoy an item immediately without paying the total purchase price upfront. It can benefit those who cannot afford high-cost items or do not qualify for traditional financing. However, it’s worth noting that the total cost paid over the lease term can be higher than the item’s original price due to the inclusion of interest and fees. Therefore, customers should carefully review the terms of a lease-to-own agreement before proceeding.

B2B Financing

B2B POS Financing (point-of-sale financing), is allows businesses to finance purchases at the point of sale, the same way consumers do. This type of financing is often used for purchases of larger quantities of goods or services since businesses typically purchase in bulk to meet operational needs, inventory requirements, or to fulfill contracts with their own customers.  Most merchants provide their own b2b financing, usually with offers with 30, 60, or 90-day payback.  These terms are not favorable for many businesses, especially SMBs, and new providers are coming into the market offering business loans with expanded terms. These new POS financing options offer immediate approval (or denial) of credit at the point of sale, making the purchasing process quicker and smoother and resulting in higher approval rates. The buyer can repay the amount over time per the terms of the financing agreement, which can be up to 12 months, giving businesses greater flexibility. B2B POS financing can benefit both the buyer and the seller. For the buyer, it provides immediate access to needed goods or services without a significant upfront investment. For the seller, it can facilitate significant sales, increase cash flow, and foster stronger customer relationships.

 

Challenges of Single-Lender POS Financing

While the benefits of POS financing are manifold, relying on a single lender can be limiting. Single-lender solutions can lead to lower approval rates and a poor customer journey. Declined shoppers start the POS financing process again, resulting in cart abandonment, and affecting sales and customer loyalty. There is also the risk of being subject to the changing lending conditions of a single financial institution.

Why Retailers Must Start With Embedded POS Financing Platforms First

Many retailers are turning towards embedded finance platforms that offer many lending options through a single gateway to counter these challenges. With an embedded lending network, retailers can manage multiple financing options like BNPL, installment loans, and lease-to-own, providing an omnichannel financing experience.

Indeed, research by ChargeAfter suggests that 66% of retailers prioritize implementing a consumer financing platform that manages the entire financing cycle, including reconciliations, chargebacks, and dispute resolution.

An embedded finance platform also removes the burden of managing complex requirements from the retailers, facilitating seamless management of waterfall financing, in which applications are automatically sent to lenders in a sequence until approval is obtained.

Merchants are thus looking for point-of-sale financing platforms that offer white-label consumer financing solutions and BNPL white-label options, giving them control over the customer experience while handling the complexity of lending and compliance in the background.

 

Conclusion

As retailers adapt to the evolving needs of their customers, it’s clear that the future lies in leveraging robust POS financing platforms. Offering an omnichannel lending experience through an embedded lending platform can significantly enhance the shopping experience, increase approval rates, and boost sales, making it a win-win for consumers and retailers.

Through white-label POS systems and a waterfall finance approach, retailers offer consumers the flexibility they desire and a better experience.

Retailers that adapt to these changes and invest in POS financing solutions today will undoubtedly be better positioned to cater

To the needs of the next-generation consumer, we are leading the way in the ever-evolving world of retail.

With embedded financing becoming increasingly popular, it’s time to embrace this trend and reap the benefits of enhanced customer satisfaction and increased sales. After all, in retail, customer experience is king – and an omnichannel financing experience through a robust POS financing platform is a significant step in that direction.

5 Common Point-of-Sale Financing Mistakes For Retailers to Avoid

Posted on by chargeafterdev

As the retail landscape rapidly evolves, one financial trend has emerged as a game-changer, satisfying the ever-increasing demands of modern shoppers: point-of-sale financing. Point-of-sale financing has garnered significant attention in recent years because it provides shoppers with instant purchasing power, flexible payment options, and simplified access to the goods and services they desire. This article explores the rising consumer demand for point-of-sale financing and delves into the factors contributing to its popularity. From its seamless integration into the shopping experience to its appeal to a broad spectrum of consumers, we delve into the 5 most common mistakes retailers make with their consumer financing offer. 

The 5 Most Common POS Financing Mistakes Retailers Make

  1. Working with a single lender
  2. Ignoring the omnichannel experience
  3. Providing a fragmented customer experience 
  4. Overlooking the value of financing data to build customer loyalty
  5. Adding additional lenders without using a platform

 

Mistake 1: Working With A Single Lender

To cater to their diverse customer base and offer the most favorable lending options, retailers must collaborate with multiple lenders catering to various credit profiles. Lenders typically specialize in specific customer segments, such as prime, near-prime, or subprime, and specific loan products like buy now pay later (BNPL), 0% APR, short/long-term installments, lease-to-own, etc. Additionally, geographical coverage is another aspect, as lenders typically only serve one region.

When a retailer relies solely on a single lender, it poses challenges. For instance, if a shopper is declined for a loan at the checkout stage, they have limited alternatives and are likely to abandon their shopping cart. This results in a lost sale and customer, as they might be deterred from future purchases. Moreover, if the lender with whom the retailer exclusively works changes their terms or ceases operations, they find themselves in a difficult situation without alternative lending options.

Mistake 2: Ignoring the Omnichannel Experience

ChargeAfter Omnichannel experience

It’s often said that one should never put all their eggs in one basket, and this is especially true when it comes to the sales experience. Customers are, in the end, individuals with different preferences when making purchases. It is important to offer a consistent experience regardless of how the consumer engages with your business.

Whether your customers are using an app, website, or physical store, they should enjoy a consistent experience, including when it comes to point-of-sale financing, regardless of how they choose to access your services. Shoppers who rely on financing to make a big-ticket purchase, for example buying furniture, will likely prefer to apply for financing online from home before heading to the store with their pre-approval to complete their purchase. This translates into other purchases that customers know they can’t access without financing and where they want to avoid the embarrassment of in-store declines. 

Mistake 3: Providing a Fragmented Customer Experience

While an omnichannel financing experience is critical, it isn’t the only barrier to a fragmented customer journey. When retailers fail to establish a streamlined process for loan applications and approvals, especially when integrating more than one lender into their offer, the result is a frustrating experience for customers. 

Consider a shopper applying for a loan at the point of sale, which gets declined. If the retailer offers more than one lending option, the customer who wants to continue looking for a loan has to start the application process all over again with a different lender. This repetition not only adds unnecessary inconvenience and time consumption for the customer but also creates a sense of frustration and confusion.

This poor experience leads to customer dissatisfaction, a loss of trust in the retailer, and potential purchase abandonment. Retailers should prioritize integrating their financing options into a single platform to establish a cohesive process that ensures a seamless customer experience, minimizing the need for multiple loan applications and reducing the likelihood of customer frustration and disengagement.

Jerome’s Furniture, a discount furniture chain store in Southern California, achieved a 67% increase in consumer financing adoption with high approval rates by embracing consumer financing as part of the customer journey with ChargesAfter’s embedded lending platform.

Mistake 4: Overlooking the Value of Financing Data to Build Customer Loyalty 

Data about customer financing is an invaluable asset that can help retailers make informed decisions across various aspects of their operations. By harnessing insights derived from customer financing data, retailers can enhance their marketing strategies, identify upselling opportunities, and optimize their lenders.

Customer financing data provides a comprehensive understanding of customer purchasing behavior and preferences. By analyzing this data, retailers gain insights into which products are most commonly financed, the preferred financing options, and the specific factors influencing customers’ decisions. With this knowledge, retailers can tailor their marketing strategies to target the right audience, showcase relevant products, and optimize promotional campaigns to resonate with customers’ financing preferences.

Access to individual shoppers financing data is a powerful way for retailers to build personalized customer relationships and highlights upselling opportunities. By analyzing shoppers purchasing patterns and financing histories, retailers can identify customers who have previously financed products and can invest in higher-priced items. With this information, retailers can personalize their sales approach, offer attractive financing options, and guide customers toward upgrading their purchases. This boosts revenue and enhances customer satisfaction by providing tailored recommendations based on their financial capabilities.

Moreover, retailers can leverage financing data to collaborate with lenders and optimize partnerships that provide their customers with the most successful financing options.

Mistake 5: Adding Additional Lenders Without Using a Platform 

Adding additional lenders without using a point-of-sale (POS) platform contributes to a poor customer experience and makes managing post-sale processes such as refunds, reconciliations, and disputes exceptionally complicated. Without a centralized system, each lender operates independently, making it difficult to streamline and coordinate these critical activities. 

Without an embedded lending platform, managing post-sales transactions becomes a cumbersome process. Each lender may have different refund policies, procedures, and timelines, making it hard to ensure consistent and efficient processing. Reconciling transactions across multiple lenders becomes equally complex, as there is no centralized mechanism to track and match payments, leading to potential errors and discrepancies.

Handling disputes becomes a more arduous task as well. Without a unified platform, resolving issues requires interacting with each lender separately, prolonging the resolution process and causing frustration for customers and retailers. The lack of streamlined communication channels and standardized dispute-resolution procedures can result in inconsistent outcomes and an unsatisfactory customer experience.

Additionally, compliance becomes more complicated without a platform. Each lender may have its own regulatory requirements, and managing and ensuring adherence to these varied compliance standards can be daunting. This increases the risk of non-compliance and potential legal issues for lenders and merchants.

Conclusion – A Platform-First Solution

Retailers are increasingly turning to ChargeAfter to embed multiple lenders into a single platform that is easy to integrate and manage to avoid making these 5 point-of-sale financing mistakes. 

The multi-lender approach increases the likelihood that shoppers who seek financing will be approved, with approval rates reaching up to 85%. Unlike single-lender systems, multi-lender platforms meet the needs of shoppers across the credit spectrum, enabling more customers to make purchases through a fast and seamless experience. This broader access to financing options enhances the customer experience, fosters loyalty, and ultimately drives higher sales and AOV. 

Moreover, the embedded lending platform empowers retailers to offer competitive financing terms to their customers. With different lenders integrated into the platform, they can cater to individual customer preferences, enhance their value proposition, and stay ahead in a competitive market.

In addition to customer benefits, ChargeAfter streamline the financing process for retailers. Rather than managing multiple lender relationships and systems, retailers can leverage a single platform that consolidates the entire financing workflow. This simplifies operations, reduces administrative overhead, and saves valuable time and resources.

 

Are you ready to get your financing right? Book a Demo

 

Cash vs. Credit Card vs. Consumer Financing 2023 Trends

Posted on by chargeafterdev

With the advent of more sophisticated consumer financing technologies and services, consumers have more options to pay for goods and services, resulting in new spending trends. 

While credit cards are still a primary method of unsecured borrowing for US consumers, their use is declining, especially with the millennials and Gen-Z. Young Americans are also less likely to use cash; data from the Federal Reserve reveals that 35 to 44-year-olds only pay for 13% of their purchases in cash. 

According to McKinsey, the decline in credit card use has partly been attributed to the rise of buy now pay later (BNPL), which has been adopted by 37% of Gen-Z. As interest rates and prices rise, consumer financing at the point of sale rises. In the first quarter of 2023, ChargeAfter saw a 55% increase in point-of-sale (POS) financing applications. 

This article explores how consumers are shifting their payment habits and what this means for merchants.

Cash 

Since the early 2000s, there has been a global shift towards a cashless society, especially with the rise of mobile and crypto wallets. The US lags behind countries like the UK, Norway, China, and Canada in digital adoption. According to data from the Federal Reserve, 20% of transactions in the US are still made in cash. It’s worth noting that the average cash transaction is $22 compared to $112 for credit cards, indicating that it is primarily used for small transactions. In 2022, Pew Research reported that 41% of Americans said they make no purchases with cash in a typical week, compared to 24% in 2015.

cashless economy consumer financing

** PEW Research Centre

Credit Cards

Research by GlobalData in 2022 indicates 47% of Americans under 35 do not possess a credit card, compared to 39% in 2016. Overall, credit cards remain popular and accounted for 40% of US purchases in 2021, according to Statistica. In July 2023, the Federal Reserve published that 20% of US loans were rejected, suggesting that higher interest rates make it more difficult for Americans to borrow. The Fed raised interest rates seven times in 2022, and the average credit card interest rate in the US is almost 25%. For shoppers with a low credit score, the average APR is around 27%, meaning shoppers are looking for an alternative. 

POS Financing

As the technology to underwrite at the point of sale has been developed, multiple POS financing products have become available, mainly driven by fintech companies. These lenders offer diverse loans, including 0% APR, long and short-term instalments, revolving credit, B2B financing, lease-to-own, and BNPL. According to a survey by LendingTree, POS financing services rose by 12% in the United States between 2022 and 2023 and are popular across all age groups. This form of consumer financing allows customers to obtain instant financing at their moment of need, often providing better terms and greater flexibility than a credit card. Data from ChargeAfter shows that the amount shoppers spent using financing increased by 53% in the first quarter of 2023 compared to 2022 in the US.

The Future of Consumer Financing

The trend towards point-of-sale financing will continue as younger generations reject credit cards and consumers face high-interest rates. As financial technology continues to evolve, the potential of consumer financing is fast growing, suggesting an increasingly integrated and versatile financial landscape.

While cash is straightforward and carries no debt, it lacks the security and reward benefits of credit cards and is quickly replaced with tech-centered payment solutions. Credit cards offer flexibility but can lead to high-interest debt and are unpopular with young people. Consumer finance delivered through a POS financing platform that supports multiple lenders and is embedded into omnichannel customer journeys is fast being adopted by retailers to give their customers financing choices anywhere they shop. 

 

References

https://moneytransfers.com/news/2023/02/03/cash-vs-credit-card-spending-statistics

https://fortunly.com/statistics/cash-versus-credit-card-spending-statistics/ 

Over 20% Of U.S. Loans Rejected In Last Year—Hitting 5-Year High (forbes.com)

https://20831387.fs1.hubspotusercontent-na1.net/hubfs/20831387/e-books/The_High_Cost_Of_Low_Approval_Rates%20(6)%20(1).pdf 

https://moneyzine.com/personal-finance-resources/cash-vs-credit-card-spending-statistics/ 

https://www.pewresearch.org/short-reads/2022/10/05/more-americans-are-joining-the-cashless-economy/

Discover the Future of Consumer Financing at ChargeAfter’s Booth at Fintech Nexus New York!

Posted on by chargeafterdev

Join us at the Fintech Nexus New York event on May 10-11, 2023, as we explore the dynamic world of financial technology and its impact on the financial services industry. As a comprehensive media organization, Fintech Nexus delivers vital insights, networking opportunities, and motivation, bridging the gap between conventional finance and its future evolution.

We invite you to visit ChargeAfter‘s booth at this event to witness firsthand how we’re shaping the future of consumer financing. As part of the consumer lending track, ChargeAfter is hosting an insightful panel discussion in collaboration with Citi Bank on May 11th, titled “Will Banks Dominate the Future of Consumer Financing?”.

Take advantage of this opportunity to learn from industry leaders about the latest trends and innovations in consumer financing and how banks are positioned to take the lead.

The panel discussion will feature Terry O’Neil, Managing Director, Head of Embedded Commerce and Strategic Growth at Citi Bank, and Meidad Sharon, CEO of ChargeAfter. The conversation will be moderated by Jeffrey Tower, EVP Business Development from ChargeAfter, ensuring a lively and thought-provoking discussion.

Fintech Nexus New York promises to be an exciting event for professionals from the banking, fintech, and investment sectors, with over 5,000 attendees expected. Be part of this exceptional gathering, and remember to drop by ChargeAfter’s booth to expand your knowledge, forge new connections, and get inspired for the future of finance.

See you there!

Big Brands Embracing Consumer Finance

Posted on by chargeafterdev

Over the past few years, many retailers have concentrated on direct-to-consumer and e-commerce. As part of this – specific consideration has been given to consumer financing, and significant agreements have been made between consumer finance FinTech companies and big-brand companies such as Walmart, United Airlines, Amazon, Lenovo, and many others, even though these retailers already have well-established private label credit card programs.

Consumer appetite for consumer financing and BNPL drives merchant demand for point-of-sale financing.


Consumer appetite for BNPL

* https://www.oberlo.com/statistics/buy-now-pay-later-us-users


Beyond surveys, historical growth statistics, or forecasts for rising popularity in consumer finance, the evidence lies with two simple metrics:

—  How many companies include consumer financing at their point of sale, and
—  Are any big brand retailers are embracing it

The fact is, consumer financing has always been a staple with big retailers.

The difference in recent times is that big brands recognize the benefits of partnering with innovative FinTechs, allowing them to concentrate on their core business while benefiting from new technologies as they are developed.

Previously, this was exclusive to merchants with the resources to integrate or develop point-of-sale finance options into their platform.

Innovation by FinTechs has accelerated the adoption of consumer finance as demand by merchants is fueled by consumers’ need for affordability in the face of the current and imminent challenging financial environment.

It is essential to understand that consumer finance does not exclusively mean Buy Now Pay Later (BNPL), although BNPL does fall under the umbrella of consumer finance.

 

Evolution of consumer finance

 

Consumer financing has evolved from credit cards and prime lending solutions often offered by traditional financial institutions such as banks to a technology-diverse fintech landscape with various financial service providers and platforms.

But what does this new ‘landscape’ offer, and how do we navigate it?

We look at how merchants use various consumer finance options and highlight their benefits.

 

Credit Card

credit card payment

The credit card option at checkout is widely known to us. It is the most prevalent payment method. Almost all banks and financial institutions provide many credit card types that are accepted as payment methods offering goods or services anywhere. One can purchase anything within a predetermined credit limit and pay later without impacting their monthly budget. A key advantage of using a credit card is converting the total purchase amount into affordable equated monthly installments (EMI), facilitating easy repayment over time. EMI conversions from credit card purchases have transformed the shopping experience significantly.

 

As popular as credit cards have been, consumers know their glaring disadvantages. The most infamous being high-interest charges. Further, the prime lender provides the loan (credit). i.e., the institution that issued the credit card reduces the credit limit by an amount equal to the bill amount converted into EMIs. 

 

Buy Now, Pay Later

 

Single Lender BNPL Platform

 

BNPL (Buy Now, Pay Later) is unsecured consumer credit and an increasingly popular fintech-enabled payment option, most commonly offered on e-commerce platforms. The history of BNPL traces back to the installment plan – a way to pay for large purchases over time by spreading it over several smaller payments.

 

As a form of POS (point-of-sale) financing, credit originates directly at the time and point-of-sale, as opposed to a customer being required to secure credit from a lender ahead of their shopping experience.

Fintech companies have developed different flavors of BNPL. However, most are similar in that they have a single lender. Sometimes, as with PayPal, the lender is also the technology provider.


How BNPL works in the USA

 

Studies have shown that BNPL increases retail sales. The reason is that some consumers may not have a credit card, prefer not to use credit cards, and many times look at BNPL as a better alternative to credit card installments, as  BNPL offers an alternative to installment payments that is often with favorable repayment terms when compared to the use of credit cards.

 

Most, if not all, well-known big brands, such as Amazon, Walmart, and many more, have teamed up with BNPL FinTechs to expand their consumer financing options to increase sales while limiting risk. This strategy has proved to be successful.

 

 

Walmart

Walmart is an American multinational retail corporation that operates a chain of hypermarkets, discount department stores, and grocery stores. With over 10,000 stores in 27 countries, Walmart offers a wide range of products, including groceries, electronics, clothing, and home goods, at low prices to attract budget-conscious shoppers. The company is known for its efficient supply chain management. Walmart added Affirm as a  BNPL for installments of 3,6 and 12 months.

Walmart Affirm BNPL

 

 

Amazon

The largest retailer in the world and founded in 1994, Amazon is a multinational technology company. It specializes in e-commerce, cloud computing, digital streaming, and artificial intelligence. 

In this example , Amazon has partnered with ZIP to offer short terms installments. 


Amazon Zip BNPL







The problem with single-lender BNPL

 

However, although very convenient, single-lender BNPL platforms do not necessarily offer the consumer the best loan terms and are limited to BNPL only.

 Customers must conform to single-lenders’ terms of service and credit score policy.

 Imposing these terms of service may result in less than desired loan terms offered to the consumer or, even worse, a failed loan origination. Both scenarios heighten the probability of sale abandonment.

Big brands have recognized that consumers shop for the best deals, not only in products and services but also in costs and terms associated with financing their purchases.

 For this reason, established merchants offer customers multiple payment options at checkout. Including multiple BNPL service providers and options. Most of which are single-lender platforms.

Bed Bath & Beyond, for instance, diversifies its consumer financing options to its customers by partnering with multiple BNPL financing providers.

Bed-Bath-&-Beyond-Consumer-Finance Multiple BNPL




Merchants have found that sale abandonment decreased because customers have more options for lending at the point-of-sale. While this is a good strategy by the merchants, it has many limitations. For one, it is still a limited short-term installment offering. Even when using several BNPLs, surveys found that almost 30% of merchants report that their consumer financing approval rates are less than 60%. 

Furthermore  –  it creates a fragmented checkout experience. Sometimes, customers may still abandon their cart, feeling overwhelmed, unsure, and confused with the various options. Decision paralysis occurs because there is too much choice.

multiple BNPL payment options

 

A study by SMARTASSISTANT found that 54% of consumers have stopped purchasing products from a brand or retailer website because choosing was too difficult.

The same is true for products & services and checkout payment options alike.



Multi-lender Consumer finance & BNPL platforms

 

As a means to offer the advantages of the different types of consumer finance options available and address their shortcomings, ChargeAfter developed a multi-lender consumer finance embedded lending platform.

Backed by over 40 lenders, in a single checkout financing option, merchants can offer their customers the best consumer loan at checkout, which is lightning fast and provides the best loan terms.

ChargeAfter’s platform and network finds the best loan suited for the customer and merchant with a streamlined and efficient process that feels indigenous to the merchants’ site and brand.

Unlike conventional consumer finance options and single-lender BNPL, surveys have shown that multi-lender consumer finance platforms achieve loan approvals of 80% or more.

ChargeAfter’s platform is seamlessly integrated throughout the merchants’ channels – online and in-store –  to create an omnichannel experience that feels proprietary to the consumer. The benefit of omnichannel experience in itself adds value to the merchant.

As a solution that maximizes return through its obsession with the customer journey experience, ChargeAfter’s platform elevates the consumer experience, reduces cart abandonment, and increases return business.

Some examples of big brands using a multi-lender platform include:

 

Lenovo

Founded in 1984 and specializing in personal computers, smartphones, tablets, and other electronic devices, Lenovo is the world’s largest PC vendor by unit sales.

Lenovo is a multinational technology company that operates in over 60 countries.

Lenovo BNPL


Jerome’s
Jerome’s Furniture is a family-owned and operated retailer that has been serving Southern California for over 65 years.

Jeromes BNPL

 

 

 

About ChargeAfter

 

ChargeAfter is the leading multi-lender white-labeled consumer financing platform and lender network for global banks, financial institutions, and merchants. Powered by a data-driven decision engine and network of international lenders, ChargeAfter streamlines the distribution of credit into a single platform that merchants can implement rapidly online, in-store, and across any point of the loan.

ChargeAfter investors include The Phoenix, Citi Ventures, Banco Bradesco, Visa, MUFG, BBVA, Synchrony Financial, PICO Venture Partners, Propel Venture Partners, and Plug and Play VC. ChargeAfter is headquartered in New York.

 

 For more information, visit https://chargeafter.com/about-us.

Unleash the Power of Embedded Finance: Here Are Some Use Cases

Posted on by chargeafterdev

Introduction

Embedded finance is a growing trend in the finance industry that involves integrating financial services into non-financial customer journeys, and it is now becoming prevalent in both B2C and B2B contexts. Embedded finance options will eventually be the norm for B2C purchases, even for traditionally conducted offline transactions. This trend helps to increase customer engagement and loyalty. As this trend continues to grow, many industries are exploring various embedded finance use cases.

Embedded Finance Forecast

 

 

What is Embedded Finance?

Embedded finance allows non-financial companies to integrate financial services or products into their digital offerings, making it more convenient for customers to purchase products and streamlining business processes. This trend has also led to embedded fintech, wherein financial service platforms integrate into commercial or financial service platforms.

In short, an embedded finance ecosystem integrates the various spheres necessary to complete the entire cycle of a financed transaction.

For instance, when a retail customer makes a purchase (in-store or online) and opts to pay for the purchase in installments, three things need to exist;

The Seller – The merchant selling the product or services through the systems they employ. In this case their Point-Of-Sale system.
In embedded finance, this is the ‘Distributor’ or ‘Embedder.’
These are retailers, software companies, and marketplaces – that integrate financial services into their products to benefit their customers.

 

The Lender – providing finance for the product or services purchased in point #1 for a fee and/or interest, allowing the seller to sell a product with no financial risk.
However, sometimes the ‘lender’ role is also fulfilled by the seller as a second source of revenue by offering loans with interest.
This is the ‘Balance Sheet Provider’ or ‘Financial service provider’: Banks, fintech, and other financial institutions.

And

Technology Provider – configuring and integrating the systems between the seller system and the lender system to create and maintain a seamless transaction
The ‘Technology Provider’ or ‘embedded financing platforms‘ are both experts in the seller technologies and service design and well-versed in the regulations and intricacies of providing financial services. They help stitch the embedded finance ecosystem together. They look at the customer journey to provide processes that are simplified and personalized.

 

A real world example would be Point of Sales financing whereby:

  • The retailer would be the ‘Seller’ such as Lenovo

 

Lenovo consumer finance bnpl

 

  • The ‘Balance Sheet Provider’ would be a group of lenders bidding to offer the best consumer financing deal (long term installments financing)

 

  • The ‘Technology Provider’, such as ChargeAfter’, enables this transaction to occur by integrating and connecting ‘The seller’ with ‘the balance sheet provider’ in an automated manner, facilitating the transaction efficiently.

Lenovo consumer finance bnpl

 

 

Types of Embedded Finance

types of consumer finance - embedded finance

* Embedded finance, a multi-trillion dollar opportunity, Source: The rise of embedded finance, Dealroom and ABN AMRO Ventures, 2022

 

  • Embedded Lending and Buy Now Pay Later (BNPL)

 

BNPL is an example of embedded lending. It falls under Point of Sale financing (also known as POS financing). BNPL  is a lending option that allows customers to purchase goods or services and pay for them through short term installment loans. BNPL financing is usually offered by fintech companies.

Point-of-sale (POS) financing is an umbrella term that describes a variety of embedded lending  methods and products. These include BNPL but also pay over time for longer and bigger purchases, as well as 0% APR, revolving line of credit, lease-to-own, and more.

Point-of-sale loans like these are gaining popularity and have become essential in improving the user experience and driving customer loyalty through repeat purchases.
According to a 2022 article by The Ascent, 56% of consumers surveyed in 2021 have used a buy now, pay later service, this is up from 37% in July 2020*

* https://www.fool.com/the-ascent/research/buy-now-pay-later-statistics/

 

Increasingly, Point-of-sale loans are integrated with online e-commerce websites as well as in-store.
Well-known big retail brands such as Best Buy, Costco,, Target, Walmart, and countless others recognize the value in offering various embedded consumer finance options in their online channels and stores with an omnichannel experience. Many of these big brands opt to integrate with consumer financing platforms such as ChargeAfter instead of developing their own.

ChargeAfter’s omnichannel multi-lender platform is designed to support merchants by providing various financing options to consumers and businesses. The platform is pre-integrated with more than 30 leading lenders, enabling merchants to offer multiple financing options using a single application directly on their e-commerce website or retail location. The platform allows for a quick financing approval process, with up to 85% of financing approvals completed in less than three seconds.

ChargeAfter’s embedded  financing platform is designed to offer shoppers various financing options, regardless of their credit history. The platform offers 0% APR, open lines of credit, short and long-term installments, card installments, lease-to-own, and B2B financing options.

 

There are many examples of well-known retail brands that offer embedded financing and BNPL at the point of sale. Below are some examples:

Jerome’s Furniture:

showcases its financing options already at the homepage, allowing customers to prequalify for financing offers.

 

Jeromes consumer finance bnpl embedded finance

 

 

In addition they embed the financing offer within the PDP:

 

Jeromes consumer finance bnpl embedded finance

 

42photo.com

Presents a promo pop up with the financial offer – welcoming any customer to to choose business financing

 

42photo.com consumer finance bnpl embedded finance

embedding the Point of Sale financing as part of a seamless checkout process:

42photo.com consumer finance bnpl embedded finance

 

 

Digital Wallets Integrated into Mobile or Online Platforms

 

Digital wallets allow customers to store and use digital currency to make payments or transfers, manage their financial accounts and track their spending. They can also be linked to traditional bank accounts or credit cards, providing a seamless and convenient way to make transactions. Examples of digital wallets include Apple Pay and Google Wallet.

  • Some of Apple’s partners, to name but a few, include Best Buy, Disney, Dunkin Donuts, McDonald’s, Walgreens, Costco, Target, and Taco Bell.

 

Apple best buy consumer finance bnpl embedded finance

 

 

  • Google Pay also facilitates payment with Best Buy and other distributors.

 

Google pay bestbuy.com consumer finance embedded finance

 

  • Loyalty programs with digital or store credit rewardsLoyalty programs that offer rewards or cashback in the form of digital currency or store credit allow customers to earn and use rewards or cashback within the platform or service they are already using. For example, credit card companies or retailers may offer rewards or cashback through loyalty points redeemed for discounts or other benefits.A familiar example of a loyalty program is the Star Bucks Rewards.

 

starbucks.com rewards consumer finance embedded finance

 

Conclusion

Embedded finance has arrived and is making its way into the finance ecosystem. The trend will continue to grow throughout all verticals of business and service providers, and more industries will adapt to it. By integrating financial services or products into their platforms, merchants  can offer a more seamless customer experience while streamlining their back-end processes. With the advent of omnichannel lending, including POS financing and BNPL, the future of B2C and B2B financing at the point of sales looks bright.

Free Consumer Finance Retailer Insights Survey 2023

Posted on by chargeafterdev

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.