Retailers Turn Data Into New Credit Options for Consumers

Like so many things looked at from a pre- and post-COVID perspective, the traditional methods of measuring credit worthiness — and extending credit — no longer are applicable in today’s omnichannel environment.

This, according to Versatile Credit Chief Innovation Officer Bill Kratzer, who told PYMNTS that there’s a growing appetite on the part of the merchants and the consumers to have lending products at the ready that are not necessarily built around a credit score.

“As we get deeper into an uncertain economy, we’re going to see that trend accelerate,” Kratzer said.

Credit card debt, and the financing charges tied to it, are at levels not seen in years, and household budgets are being stretched to historic limits.

While most consumers are aware that applying for a card online, in a bank or at a merchant can impact their credit score in a negative way, so too are merchants and lenders aware of the value inherent in giving consumers choices to empower them to pick the option that works best for them. Doing it all while and wherever they shop is the new gold standard.

Looking at the Funnel

As much as the process has changed on both sides, there are still certain rules and procedures that need to be followed.

“You’ve got to provide something that’s going to be frictionless if you’re going to capture customers in your funnel,” he said.

Against that backdrop, the consumer shopping on their tablet may find some items that they covet — but that are expensive. But with three or four pieces of relevant data, they can find out in seconds whether they qualify for revolving credit, promotional financing or an installment loan plan. Or they could be allowed to easily switch their profile to an in-store setting (let’s say they’re buying a couch and want to try it out), and the financing and offers could travel with them.

There’s an obvious downside in not providing that choice and seamlessness, said Kratzer. A merchant is only a click away from losing business when a consumer toggles over to their nearest competitor.

Behind the scenes, the wealth of data and advanced technologies can help merchants leverage several lending choices, spanning primary lenders, secondary lenders and even tertiary lenders.

Omnichannel interactions, he said, “are an intimate sales process — and there are a lot of different ways to analyze the data,” including merchants having the enhanced ability to see what’s spurring consumers to finance their purchases and then close the sale.

“You can peel back the data to see which of these options are being used the most effectively,” said Kratzer, as well as what these consumers are looking for when they make a purchase. “Merchants need to know how well their channels are performing.”

Parsing the data can help reveal why people might be walking away from offers or whether the promotional mix needs adjustment. Simply looking at approval rates, average line assignments or average loans may mean merchants are missing opportunities to rethink how they engage with their end markets.

Along the way, the merchants and the lenders can measure success in a range of different ways. While traditional metrics such as approval rates may not apply, a new form of funnel that is attracting and transacting more “good customers” could be seen as a better “net.”

“The overall results speak for themselves,” said Kratzer, “and as more people get approved on the whole and more people have more financing options at the ready, more consumers will take advantage of those options.”