Upfront financing is a kind of instant financing that is available even before the customer thinks of buying anything.
In light of the ongoing pandemic, retailers are taking proactive measures and introducing relevant products to ensure business progression during this need of the hour. An easy option merchant can count on to fuel business continuity now and in the post-coronavirus world is to offer upfront financing solutions.
According to a TechCrunch* report, the number of consumers ordering online has jumped 49 percent in April compared to March, and that number is continuously growing as retailers have closed their offline stores following shelter-in-place restrictions. In such a scenario, providing upfront financing solutions can make shopping more accessible. It also encourages larger average order values increasing revenue for the business. So here are five reasons why you, as a merchant should offer your consumers upfront financing.
1. Millennials are driving short-term loans
In the past 3-5 years, short-term installment loans have been on the rise and largely due to Millennials (individuals aged 23 – 38). The historic financial crisis of 2008 instilled a lack of trust in the traditional way of banking, and individuals aged 40-54 and 66 – 75 have often warned them of the dangers that come with credit cards and the high-interest rates. Apart from this, individuals aged 18 or older are also moving towards digital banking.
The concept of upfront financing is new, but it has existed in different ways for big appliances, holidays, jewelry, and more. So, what is new? Upfront financing is a kind of instant financing that is available even before the customer thinks of buying anything – you give more purchasing power as soon as a customer visits your store. Due to these uncertain times, as more retailers are taking their businesses online, giving more financing choices upfront can attract more customers.
2. Instant financing VS credit cards
Credit cards are commonly used by older Americans; however, according to the Bankrate** survey, just 33 percent of Millennials own a credit card. Millennials account for the greatest share (around^ 22 percent) of the U.S population. Considering these numbers, it is notable that most shoppers don’t own/use a credit card. It is also easy to understand what and why Millennials’ preferences will have a deep impact on your business.
Although Millennials are drawn to instant financing, older generations are just as attracted to this idea. In a recent survey conducted by American Banker, 87 percent of respondents expressed more interest in paying for purchases via installments vs credit cards. Upfront financing is for those who do not have a credit card or who do not want to rely on it. It is exclusively for today’s cautious consumers.
3. Instant financing increases sales
Cart abandonment is one of the most important problems merchants face online. Studies^^ have found that 81 percent of shoppers abandon their carts online before they complete their purchase. The checkout process can be tiring for consumers, and any friction in this process can result in lost sales. One way to thwart the cart abandonment rate and increase the chances of making a sale is to offer upfront financing – an instant financing method that offers a flawless checkout.
Imagine having a conversation with your consumers as soon as they visit your store and surprising them with an upfront financing offer saying, ‘Congratulations! You’ve been approved for $10000’. Think about the satisfaction this would bring to your buyers and how easy it would be for them to checkout. Upfront financing is essentially just that – it is giving more purchasing power to your consumers and the flexibility in making a payment to ease the checkout process.
4. User-friendly financing is the key
Retailers would always want their consumers to be in the ‘driver’s seat’ for their shopping experience, and technological advancement is leaving no stone unturned in enabling so. An easy-to-navigate experience where your consumer chooses his preferred payment option for paying the installments makes the shopping experience easy. Upfront financing is just that – attractive and easy. When your consumers visit your store, they get a pre-approved amount in their account, and then all they have to do is choose what they want to buy and make the payment. This whole process takes just a few minutes!
5. Better approval rates – makes shopping accessible
If you help your consumers in managing their credit or rather making it easier for them to access credit, they will always be loyal to your business. With Upfront Financing, not only will you have an advantage over other retailers, but you will also enable a stronger relationship with your consumers due to the upfront offer being made. A Citizens Financial Group’s# survey found that 62% of consumers would prefer fixed monthly plans with clear payment terms. The research also showed that merchants should modernize their payment model by offering instant financing options.
Before offering any financing option, high approval rates should be on the top of your mind. With upfront financing, you tend to get 100 percent approval rates as the consumer is already screened against the eligibility criteria. Merchants can offer instant financing to consumers across all credit tiers (prime, near-prime, and subprime). With the benefits explained, you can now imagine the impact this could have on your conversion rates and business.
Will you jump on the new wave of credit?
Having a concrete plan to deal with the on-going pandemic and its after-effects will be key for your business to thrive in the coming years. Skeps’ upfront financing is a method that is sure to give your consumers more purchasing power to deal with the pandemic world and enhance their shopping experience like never before. It is a simple solution that will help your business prosper while providing your shoppers the flexibility to help them buy items they need when they need it.
*TechCrunch: US e-commerce sales jump 49% in April, led by online grocery
**Bankrate: Millennials Spend More on Debit Purchases Than Credit
^Pew Research Center: Millennials overtake Baby Boomers as America’s largest generation
^^Retail TouchPoints: Study: 81% Of Shoppers Have Abandoned An Online Cart
#Customer Experience For Financial Services: Point of Sale Payment Plans Are Taking Off — Citizens Bank Is Ready