Retailers stepped up to the plate for non-prime customers in 2021, offering installment programs that gave more people access to products and services. Orlando Zayas, CEO of Katapult, predicts that lease-to-own and buy now, pay later options will continue to proliferate, giving businesses access to a huge underserved market and empowering consumers to get what they need and want. Read his thoughts in the PYMNTS eBook, “In a Word: 50 Thought Leaders Sum Up 2021.”
For retailers, 2021 will be remembered as “the year of inclusion.” The last year presented unique hardships for consumers, who suffered mentally, physically and financially as a result of the COVID-19 pandemic. To meet the needs of customers, and also out of necessity, eCommerce and in-store retailers took steps to be more inclusive, seeking solutions that enable all types of shoppers to purchase necessary items — not just those with high incomes and great credit scores.
During the pandemic, lease-to-own payment options became a growing trend in retail and eCommerce, as leasing provides non-prime consumers with the option to get products they either could not afford to obtain with a single payment or otherwise would have not had the access to obtain.
In a recent study on payment options for the underserved, PYMNTS and Katapult, an eCommerce-focused financial technology company, found that 79 million American consumers have an interest in or have used lease-to-own payment options. This demonstrates that underserved consumers require a better way to get the things they need — and more paths to financial empowerment that are based on fairness and transparency.
The rise of paying in installments or buy now, pay later (BNPL) is giving millions of people access to credit to purchase bigger-ticket durable goods, such as furniture, appliances, tires and more. Still, there are millions more who don’t qualify for BNPL due to poor credit or no credit. Unfortunately, a simple credit score can’t accurately reflect a customer’s full ability to be financially responsible.
Leasing to own is not for everyone. For many customers, BNPL is better for smaller purchases. For larger purchases, many consumers look to installment loans to spread out the payments a bit longer. Lease-to-own programs can also offer flexible terms that empower customers to select affordable payment amounts and schedules that fit their budgeting needs.
In 2022, Katapult expects lease-to-own programs to continue to grow in popularity because they build a long-term relationship with buyers by offering customer-centric options such as fast approval and early buyout options. By ignoring the non-prime market, retailers are missing out on a whole segment of potential buyers. In fact, Katapult’s research found that enterprise retailers offering lease-purchase options for durable goods like appliances and electronics typically see a 112% increase in transactions and an 11% increase in conversion rates.
Today’s non-prime customers need household products just as much as a prime customer, but often have limited options to purchase those goods. Going forward, inclusion should be at the forefront of retailers’ efforts to ensure that individuals and businesses have access to goods and services that meet their needs, regardless of a FICO score.
