While point-of-sale (POS) financing is offered predominantly in the digital space; traditional brick-and-mortar businesses are beginning to change the narrative. The e-commerce industry is becoming highly competitive, and merchants now realize that providing an omnichannel financing experience not limited to online shopping might be paramount in keeping pace in the POS market.
Add to that more consumers worldwide revisiting stores after the COVID-19 shutdown, and adding in-store financing options becomes an attractive prospect for businesses looking to revitalize physical shopping.
Why Offer New Financing Products?
Retail businesses and other merchants who only offer card purchases and other traditional lending products will quickly lose ground to those who accept up-and-coming, contemporary financing methods, such as Buy Now, Pay Later (BNPL).
Customers can receive financing and take purchases home within minutes with POS financing. There are no tedious applications to complete, phone calls to verify identity, or comprehensive credit checks before approving applications.
Also, credit cards are not always an ideal (or even possible) payment method for many consumers. They may be running up against borrowing limits or losing too much money each month to high-interest rates. Instead, they can finance their products or services over a predetermined period, avoid interest expenses, and without impacting their credit score.
In-Store Financing Options Are on the Rise
While BNPL has gradually become a mainstay on the digital landscape and merchants have steered these products almost exclusively towards e-commerce checkouts, the online financing industry has become saturated, and competition is soaring.
However, as governments lift pandemic-driven shutdowns and stores reopen, more businesses explore installment options at physical checkouts to encourage in-store purchasing. Merchants have experienced some success in this arena over the past year and are now ramping up their efforts.
This strategy shift diverts some competition away from online retail and towards in-store transactions as many businesses believe this is just the beginning for in-store POS services.
Benefits of In-Store Financing
POS financing options, in general, provide numerous benefits to merchants and the customers they serve. However, those benefits that relate more directly to in-store shopping include the following:
Improved Conversion Rates
Conventional lenders conduct hard credit checks to approve financing. They often reject applicants with poor or inconclusive repayment history. Many customers applying for first-time loans do not have sufficient credit history.
However, a consumer’s chances of approval improve by offering in-store installment loan options from lenders who rely on alternative scoring data and perform only "soft" credit checks, making financing more accessible to first-time borrowers. Eliminating credit score requirements from the financing process allows merchants to build a more extensive customer base and drive more in-store business.
POS financing can provide consumers with an instant decision. Faster approvals can be critical when customers wait in potentially extended checkout and customer service lines during in-store transactions.
Unlike online purchases made from the comfort of a consumer’s home and in a relaxed environment, physical shopping can be much more hectic, mainly when stores are crowded. Waiting for approvals with lines of people can be stressful, and consumers might be more inclined to cancel orders without purchasing if they are waiting for prolonged periods.
Higher Average Order Value
When consumers leverage POS financing, they are not necessarily limited to small purchases at checkout. Instead, if they can divide up repayments and budget appropriately, they might spend more during each store visit and increase their Average Order Value (AOV).
Including big-ticket items—such as furniture and electronics—to installment loan plans provides more selling opportunities and boosts revenue.
Consumers Aren’t Increasing Their Line of Credit
Customers are not on the hook for new lines of credit (LOC) when they apply for financing at POS. BNPL plans don’t appear on a credit file the same way that credit cards and traditional loans do, which results in a lower credit impact so long as payments are made on time..
While they don’t appear on a credit profile when paid appropriately, merchants and lenders will still have credit leverage if a customer pays late or defaults, as those instances can still be reported and will affect credit.
Be A Part of the In-Store Shopping Resurgence
In-store financing solutions are a powerful means for merchants to attract customers and encourage more purchases. As these installment loan options become more prominent and customers return to brick-and-mortar locations, their popularity should continue rising.
Whether or not in-store financing is appropriate for a business is often situational, but all merchants should explore the option and consider its potential benefits before deciding. Flexibility at the point-of-sale is an indisputable revenue booster and can make customers more likely to return to take advantage of more convenient ways to pay.