Inflation is constantly forcing consumers to rethink their budgets and how far their dollars stretch.
Joe Sharp, CTO of Versatile Credit, told PYMNTS that having a comprehensive set of financing options on offer at the point of sale — online or in-store — can help seal the deal, determining whether the merchant closes the sale, or sees the shopping cart abandoned.
As Sharp told PYMNTS, “What we’ve seen is that customer wants a way to make a purchase.” The intention to spend, then, is there.
And with rates rising, “The consumer is becoming more accustomed to a low APR interest financing product, as opposed to the last decade, where a zero APR product had been the expectation,” Sharp said.
But getting the right offer, at the right time, to the right customer is no easy task. Many merchants do not have the right data in hand, or the right analysis, to determine if their credit programs are effective.
Oftentimes, he observed, “The credit team at a company will have their interpretation of what’s happening in the storefront — and so they have this concept of how they believe their credit program is functioning.”
But perception may not match up with reality, Sharp said. The credit teams may think their secondary credit providers are performing well, because there’s a strong relationship in place, or even because “anecdotally, they’ve heard positive things about the program.” But drilling down into the data might reveal that, for example, a number of stores in the merchant’s pantheon are grossly underperforming the rest, in terms of sales conversions and how the credit program is being used in those locations. “It gives them the ability to then correct that in their portfolio,” he said.
As for the data itself, Sharp said, “in the last two years, we’ve noticed a shift in both the appetite to consume advanced analytics and also the format in which we need to present them in order to be most useful to our end clients.”
Merchants, he said, want to be able to see, at a granular level, which of their sales associates are adequately leveraging financing within their sales process. Platforms such as Versatile Credit’s, he said, can make that insight easier by collecting information throughout the financing process and making it available to the enterprise. Easily digestible dashboards and reports enable retailers to benchmark performance, he said, and optimize the financing programs depending on demographics, regions and in-store or online channels.
That data-rich environment, he said, allows the retailer to offer a broader range of financing options, while lowering customer acquisition costs. For the lenders on the other side of the platform, there’s the benefit of reaching more credit-worthy borrowers, more quickly.
In a nod to the growing appeal of short-term (and interest-free) programs, Sharp noted that Versatile Credit is launching an installment product with Bread Pay. Elsewhere, the reality of inflation has primed consumers to expect to be charged interest for the convenience of paying over time. That means that it’s become easier to offer installment loans that offer 5.9% APR, for example.
Indeed, as Sharp noted, “More products can enter the space and become available on a platform like ours, where a merchant can easily introduce an installment loan, without changing their entire program.”
A number of retailers across a broad swath of verticals are recognizing the value of financing and are, increasingly, offering it to their consumers. The home furnishings industry has been a prime example — as Sharp said, “If you’re a furniture company and you don’t offer financing, you’re already behind in that race.” Elsewhere, home improvement firms have been gravitating toward having financing available.
No matter the vertical, he said, financing options must be omnichannel in nature, on offer wherever the consumer is making a purchasing decision. The buying decision may be made online, but when it comes to making a significant purchase, consumers generally like to come in and touch the merchandise. One optimal strategy is to prequalify consumers online before they come into the brick-and-mortar environment — which primes them to complete the sale once they do step onto the premises.
Looking ahead, he said, consumers want to engage with a workflow where they offer up only a few bits of information about themselves — and are presented with several offers to help make their decision in the spur of the moment. They don’t want to be burdened with paper applications, or filling out dozens of data fields to see what might be on offer. Retailers, he said, will have to meet those expectations or risk losing sales.
As Sharp told PYMNTS, “the traditional credit process is a thing of the past.”
We’re always on the lookout for opportunities to partner with innovators and disruptors.
Learn More