7 Ways to Know If Point-of-Sale Financing Is Right for Your Business
Consumer credit at the point of sale has evolved quite a bit over the last several years. From traditional credit cards and retail branded cards to layaways and on-account sales, merchants are continuously finding ways to make their products more affordable to customers.
More recently, though, a new financing option has started to make waves in the retail industry: “buy now, pay later” aka point-of-sale financing or POS financing.
POS financing is an appealing option, particularly among younger demographics who are more credit card resistant than their parents and grandparents. For these shoppers, closed-end credit products have become an attractive payment method for both online and in-store purchases. On the merchant side, POS financing can attract more customers, increase order values and get more people to complete purchases.
Of course, point-of-sale financing may not be suitable for all businesses. The question is, how can you know if it’s the right offering for you and your customers?
To answer that, we’ve put together some common signs that it’s time to offer point-of-sale financing. Have a look at the points below, and if you find yourself nodding your head to several of them, it’s high time to explore POS financing.
1. High Average Order Values (AOV)
If your business already sees high AOVs, your customers would likely appreciate the option to break their purchases into installments. Not only does this give them more flexibility to manage their finances and avoid bulk payments, but point-of-sale financing is proven to increase order values even further. At Bread, some of our partners have increased their AOV by 155% thanks to alternative financing options.
What’s more, a Forrester study found that companies who introduced an online point-of-sale financing option saw sales increase by up to 43%.
This doesn’t really come as a surprise. POS financing makes your products more appealing and accessible to shoppers who don’t have the funds to pay in full. When people know that they have the option to spread their payments out, they’re more likely to complete the purchase—and many may even buy more while they’re at it.
2. Ecommerce is a Major Sales Channel
If you do a lot of business online, POS financing is one of the most ecommerce-friendly credit options for your customers.
Branded store credit cards take some time to approve and layaways are too cumbersome to offer online. Applying for POS financing, on the other hand, takes minutes and can be done right on your website.
When online shoppers can get instant access to credit without having to leave the store, there’s a higher chance that they’ll get through the checkout process and convert to paying customers. Here at Bread, for example, we’ve seen merchants increase their checkouts 211% simply by adding a pay-over-time option to their store.
3. Products Are Durable and Long-Lasting
POS financing makes a lot of sense if you’re offering durable, long-lasting products, such as furniture or jewelry.
Unlike consumable goods like toothpaste or cereal, shoppers typically spend a lot more time considering a purchase if it’s something that they’ll be using for an extended period. Customers also tend to weigh their options more seriously, and they take the time to evaluate different merchants.
For this reason, a shopper-friendly credit option like point-of-sale financing could be just the thing that sets you apart. When implemented correctly, it can move customers through the checkout stage with less resistance.
4. You Already Offer Branded Credit Cards
If you’re already offering your customers a private label credit card (and they’re actually using it), that’s a good indication that your shoppers are open to credit options.
As mentioned earlier, though, modern consumers like millennials tend to shy away from credit and store-branded cards. As such, POS financing can be an effective credit alternative for younger customers who still want to shop with you, but don’t want to apply for a credit card.
Think of it as Credit 2.0. It’s a modern financing method that’s convenient and flexible, making it all the more attractive to today’s shoppers.
5. You’re Struggling with Cart Abandonment
If you’re having issues with cart abandonment on your ecommerce site, POS financing could help you increase conversions. High prices are one of the most common reasons for shopping cart abandonment, along with lack of payment options, and shipping costs, to name just a few.
In most cases, customers freeze when it comes to finalizing the purchase, and they begin to weigh up the costs. With POS financing available, this concern is minimized. Thanks to regular installments, purchases are more accessible, and customers are more likely to follow through on processing their order.
6. Customers Don’t Have (or Want) Access to Traditional Forms of Credit
Payment cards and other forms of credit will continue to be an important component of many consumers’ financial journeys, but you also need to recognize that not everyone has them. Plus, some people may simply want an alternative to traditional forms of credit.
This is where POS financing can come in handy.
By offering shoppers an alternative payment method, you could reel in customers who don’t have access to traditional credit. What’s more, POS financing and closed-ended credit options break down payments into predictable installments (e.g., 4 fortnightly payments), allowing shoppers to plan for their purchases.
7. You Want to Improve the Customer Experience
In a world where consumers have more choices than ever before, retailers must strive to compete on experience. Creating a delightful, convenient shopping experience is key if you want to make it in today’s retail landscape.
While product availability and customer service all play a critical role in this, the checkout process is one component that can heavily affect the shopping experience. When customers aren’t able to complete their purchases in the way that’s most convenient for them, they’ll abandon your store and move on.
You can prevent that by giving them convenient payment options like POS financing. Doing so can vastly improve the checkout process — which not only results in higher conversion rates but also improves people’s overall perception of your brand.
This leads to customer loyalty, which increases purchases and AOVs, which then drives higher profits… and you get the picture.
The bottom line? Providing credit options at checkout isn’t just about making products more affordable. When done right, alternative payment methods can boost the overall shopping experience.
Bringing It All Together
To wrap up, POS financing may be right for your business if you sell high-ticket or long-lasting and durable items and you’re struggling with people abandoning their purchases, particularly online. Plus, if you cater to younger, card-averse consumers or simply want to improve the overall retail experience, then you should explore point-of-sale financing and use it to win more sales.