Point of Sale (POS) financing has been a hot topic in the last several years. In just the past few months, Affirm, made famous for financing expensive Peloton bikes, launched their IPO. And, buy now, pay later hero, Klarna, received a $31B valuation.
Big banks are buying up FinTechs to curb the threat of challenger banks luring away their deposits and merchants with innovative technologies. But, the high cost of high tech may make some community banks and credit unions wonder how they can ever keep pace. If you can’t buy the tech or build it, how can you compete?
Competing with global banks and billion-dollar FinTechs may not even seem like a worthwhile strategy but as demand for faster, easier, and better digital services continues to grow, incorporating POS technologies is no longer optional if community banks and credit unions want to stay relevant.
Persistent’s recently announced partnership with FinMkt offers community banks and credit unions a cost-effective, speed-to-market solution for providing their customers with a best-in-class POS platform to meet the demands of their debit card and merchant customers for affordable, easy-to-use financing.
Generational driven growth.
Based on an often-quoted McKinsey Consumer Finance report published in 2019, the total US outstanding balances originated through the point of sale installment lending solutions stood at $94 billion in 2018 with an overall total addressable market (TAM) expected to exceed $1 trillion1. Point of sale growth has been propelled by millennials who are attracted to low interest or same as cash promotional financing that offers lower rates than their credit cards and more buying power than their debit cards. The days of in-store layaway and store-branded credit cards have been replaced with real-time financing offers for purchases of all types, including home remodeling and elective healthcare.
Consumers, already used to having multiple payment options at the point of sale thanks to companies like PayPal and Klarna, now also demand competitive financing for large ticket purchases. For today’s merchants, offering financing to customers is no longer a nice-to-have it’s a need-to-have if they want to attract new customers and grow revenue.
Competition for merchant business is fierce.
Community banks and credit unions once able to rely on brand loyalty are learning that loyalty is becoming more tenuous as companies like Affirm, Amazon, and even Facebook attract merchants with expanded services. Providing merchant customers with a point of sale financing platform helps retain deposits, can attract new debit card customers, and provides a marketplace in which to deploy capital.
While there is a sense of urgency to keep up with evolving technology as well as the changes in consumer behavior and merchant needs, it is an exciting time for community banks and credit unions.
Partnerships like the one between Persistent and FinMkt make cutting-edge technology cost-effective for small and mid-sized banks and credit unions to integrate with minimal tech allowing these institutions to empower merchants of all sizes with sophisticated solutions to bring prosperity to their communities.
How does the platform work? Four easy steps in just a few minutes
- Apply: The merchant provides an application for financing to their customer which can be sent via email, SMS message, accessed on a merchant’s website, or initiated by a QR code captured on the applicant’s device.
- Select: After completing a short universal application, customers are matched with offers in real-time based on a soft credit pull. The consumer compares the rates and terms before selecting the offer they wish to accept.
- Approve: Final approval happens after the customer accepts an offer and agrees to a hard credit pull.
- Fund: The last step is to complete the required financing documents which vary by lender and product and the funds are disbursed directly to the merchant.
Improving the customer experience
Merchants offer financing to make their products and services more affordable to more customers. Single-lender platforms only approve customers within a narrow band of the credit spectrum. And, low approval rates of approval are not a good experience for the customer or the merchant.
By pooling lenders who cater to different credit profiles and incorporating them all onto one platform with a seamless customer experience, approval rates are dramatically increased providing measurable sales growth for merchants.
Customizable End-to-End Solution
The technology to create a single universal application that meets the compliance requirements of each lender delivers real-time offers to the consumer and provides a portal for merchants to manage the loans is complex and sophisticated. FinMkt’s easy-to-use point of sale financing platform is a complete end-to-end solution to accelerate speed to market and it is completely customizable and configurable. Community banks and credit unions can have a customizable, white-label solution aligned with their branding and built for their specific needs including the ability to configure the lenders and products available to merchants.
Source – McKinsey Article: US Lending at point of sale the next frontier of growth