Point of sale (POS) financing is nothing new. But more and more innovative businesses are catching on to its growth benefits.
POS financing has been offered for decades through company-branded credit cards and car dealerships, for example, that offer flexible installment loans to consumers. What’s most interesting, however, is how quickly POS financing is changing how people consume—both online and in stores. We’ll use Airbnb as an example shortly, but even mega brands like Walmart are modernizing payment plans.
Rather than purchasing a dishwasher, for instance, outright using a credit card, debit or cash, consumers can pay 25 percent up front (for example) and pay the rest in installments over the next several months.
The simple fact that consumers can pay less money at the time of purchase—and not have to stress over large interest rates, compounding fees, maxing out their credit cards, and so on—could open a world of opportunity for businesses and consumers alike.
How point of sale (POS) financing can help your business grow
Reaching a whole new demographic of consumers
Businesses can now reach a whole new demographic of customers who might not have purchased their products if they had to pay for the whole purchase upfront. This could be appealing to lower-income customers or people who struggle with bad credit scores and can’t get loans or credit cards at sustainable interest rates.
Point of sale financing could be appealing to young consumers who prefer to pay less over a period of time (such as with phone purchases and plans), perhaps because they have less disposable income. Suddenly, companies can access a new and younger consumer base to market and sell to.
Removing the barrier to purchase entry—and increasing sales
When a staggering 69 percent of online shopping carts are being abandoned by users before completing the sale, many online retailers—and businesses—are looking for innovative ways to remove the barrier to purchase entry. Perhaps POS financing is part of the solution.
A Forrester Research study found that those businesses that implemented an online POS financing option saw a 32 percent increase in sales. Not only do the companies see increased sales, they see larger, more costly purchases taking place among a broader and more expansive customer base.
More sales. Higher pricepoints. Increased volume. Bigger reach.
Providing more point of sale financing options
The bottom line is: people want options and choice—especially when it comes to their finances. Those businesses that have the cash flow to offer POS financing can give their customers options. That could be the only thing separating one business from its competitor.
Plus, payment options could better suit the customer’s budget and monthly income needs. For example, some POS financing options include a 60-day or 90-day payment plan, others, such as Airbnb, opt for 50 percent now, 50 percent later plans.
POS financing case study with Airbnb
In January 2018, for example, Airbnb launched its version of POS financing to offer a new flexible payment option for travelers. Before that point, Airbnb guests paid for the entire trip at the time of booking. But, as we all know, accommodation can be the biggest travel cost and can alienate those consumers who may not be able to afford the entire payment months before the trip.
Given the option to pay less up front, Airbnb stated that “40 percent of guest chose to do so and opted for higher-value bookings on the whole.” The company saw a clear demand for more convenient payment plans. This trend is happening throughout every industry and online marketplace—and businesses are taking notice.
Expand into new markets and increase sales
With Progressa Connect™, originators and point of sale platforms have more opportunities than ever to expand into new markets, reach young consumers, and increase sales (and volume) by offering flexible