What happens when you offer more buyers flexible payment options? They’re more likely to to do that thing merchants love. Add to cart.
A study by RBC Capital reported that offering consumer financing “increases conversion rates in retail by 20% to 30% while also lifting the average order value by between 30% and 50%.” So it’s clear. Putting customer financing on the table works. But how do you implement it?
What is Instant Financing?
With more and more people losing trust in consumer credit, instant financing is undoubtedly gaining popularity. Here we should note that traditional instant financing is associated with short-term loans, such as a cash advance with a high-interest rate or pawn loans that require collateral. While such loan terms are not ideal for borrowers, they remain quite widespread as funds can be obtained on the same day without credit checks or time-consuming paperwork.
But financial technologies are here not only to help individuals obtain funds but to empower customers. And we’ll talk about one of the most popular instant consumer financing methods to do that: point-of-sale (POS) financing. POS financing is an upfront payment model that benefits customers by allowing them to make a purchase without paying the whole sum at once but with incremental payments. This model is beneficial for businesses as well as it supports merchants by helping them increase sales and customer satisfaction.
Forms of Instant Financing
Point-of-Sale Financing: One popular method of offering instant consumer financing is through point-of-sale financing. This involves partnering with a third-party financing provider or setting up an in-house financing program. When a customer is ready to make a purchase, they can apply for financing on the spot, either online or in-store. The application process is quick and often requires minimal documentation. If approved, the customer can instantly access credit to complete their purchase.
Buy Now, Pay Later (BNPL) Services: Another way to provide instant consumer financing is by partnering with buy now, pay later services. These services have gained significant popularity in recent years, allowing customers to split their purchases into installment payments. By integrating with a BNPL provider, you can offer customers the option to choose these financing options at the time of checkout. The approval process is usually fast, and customers can immediately proceed with their purchase, paying in installments over time.
Mobile Apps and Digital Wallets: With the increasing use of smartphones and digital wallets, some companies have developed mobile apps or integrated financing options into existing digital wallet platforms. Through these apps or wallets, customers can access instant financing with just a few taps on their mobile devices. The process typically involves a quick application, instant approval, and seamless integration with the payment process, allowing customers to complete their purchases immediately while spreading the cost over time.
Merchant financing is a type of loan for small businesses that accept card payments. The lender provides a lump sum of funding and collects a portion of the business’s card sales until the loan is paid off.
Direct-to-consumer financing, on the other hand, is ideal for higher-value purchases and small businesses. Loans are given to borrowers directly, so consumers can pay merchants upfront and repay lenders over time. While more accessible than direct-to-merchant financing, direct-to-consumer lending also comes with certain restrictions for both customers and merchants.
The good news is that fintech solutions are here to disrupt that and enhance instant financing for consumers. Fintech customizable BNPL tools, like those offered by Tarya, democratize financing and allow even non-financial entities to offer financial services.
Now, merchants can become lenders themselves, erase the need for third-party lenders, and set their own financing terms needed to boost sales and user satisfaction. How? Let’s find out!
How to Offer Finance to Customers? Easy as 1, 2, 3
Online financing is growing in popularity thanks to the evolution of fintech. Offering BNPL has become the norm for many online retailers across different industries. As stated earlier, retailers can either act as lenders or rely on third-party lenders to give customers more purchasing power and financial options.
The way BNPL works is pretty straightforward. It’s easy as 1, 2, 3:
- The customer selects an item and at checkout, presses the BNPL option that’s integrated by the merchant. To save resources, ensure fast time-to-market and create positive user experiences, merchants can pick an out-of-the-box BNPL solution. For example, Tarya is one of the most sought-after platforms that offers customizable modules that can be embedded in the customer journey; it also helps merchants keep all user data in-house, regaining power over customer relations.
- After that, the customer fills their details in, and a risk assessment process takes place. If approved, the customer gets the item(s) and the merchant receives an upfront payment.
- Finally, the customer repays according to the set conditions, while the merchant has the chance to create a user base of satisfied customers and boost sales.
Best Consumer Financing Companies (Factors to Consider)
Ready to offer instant financing to your customers? Great! But which one to choose? The truth is that with numerous fintech companies offering BNPL tools, it’s hard to name the best consumer financing companies out there. That said, there are certain characteristics to look for when choosing a BNPL provider:
- A company that can create a positive customer journey: Sometimes it’s not enough to offer finance to customers. Businesses must be able to provide positive user experiences. For example, to reduce cart abandonment, one should choose a platform that can guarantee that the checkout process is seamless. As approximately 70% of customers abandon their carts before purchasing, BNPL should come with excellent integration, no interruptions at checkout, and user-friendly features to reduce these cart abandonment and churn rates.
- A company that provides versatile installment payment plans: By having diverse payment plans, merchants make shopping accessible, which can lead to higher sales and brand loyalty. It’s not only shoppers but merchants that can take advantage of high flexibility. BNPL solutions like Tarya’s BNPL, for example, allow any retailer to become a lender and set their own financing terms and customizable features based on advanced risk assessment models. This can help customers choose from different installment structures, such as Pay in 4, Pay Later in 30 Days, and more.
- A company that can support scalability and reduce risk: A good consumer financing company should be able to offer flexibility and scalability. As businesses expand, multiple channels should be addressed, including online and physical stores. By enabling customers to obtain goods and services easily, you can improve sales and profitability and attract new customers and loyal clients. Even when scaling, risk management should never be ignored. In other words, the BNPL of your choice should offer advanced risk management tools, such as those provided by Tarya and designed to match any merchant’s business goals.
- A company that tackles user data control: Last but not least, good BNPL companies should not only streamline payments but help merchants regain control over customer data. Loss of data control is one of the main pain points BNPL solutions should address in order to help retailers comprehend what users want, need, and like. Take Tarya’s BNPL tools, for example. They don’t solely allow merchants to offer finance to customers; the consumer finance program designed by Tarya enables businesses to regain control over data, protect their users’ information and establish positive customer relationships in the long term.
Why Offer Instant Financing in the First Place
And now we’ve come to our final point. Before answering the question How, you should ask Why you need instant financing models. Why? Simply because:
- Instant financing like BNPL empowers users. It allows them to get what they want now and pay for it later. It gives them more purchasing power and the opportunity to invest in themselves, which can result in higher satisfaction, repeat customers, and brand loyalty.
- Instant financing can boost revenue streams. By making shopping accessible and leaving users satisfied, businesses can experience an increase in basket conversion, average order value, and larger deals.
- Instant financing can give retailers a competitive edge. By meeting today’s consumer needs and catching up with the latest fintech innovations, businesses that offer BNPL can stay ahead of the game and deliver real-world value. With Tarya’s BNPL model, for instance, a retailer can become a lender and tap unprecedented opportunities before their competitors.
In the end, there’s a lot to learn about instant financing. But as people say, the best way to learn is by doing. So waste no more time and access Tarya’s BNPL 2.0 TODAY!