Point-of-Sale Financing: A Game Changer for Merchants During the Holiday Season

by Nici Pillemer


December 24, 2023

Point-of-Sale Financing Holiday Season

The holiday season is a critical time for merchants, with consumer spending reaching its peak. In recent years, a significant trend has emerged that is reshaping the retail landscape: point-of-sale (POS) financing from banks and regulated lenders. This innovative pay-over-time solution offers customers the same flexibility as Buy Now Pay Later (BNPL), often with low or no interest, but with the stability of a bank.

For merchants, POS financing is not just a payment option but a powerful tool to increase sales, customer satisfaction, and loyalty.

What is Point-of-Sale Financing?

Point-of-sale financing allows customers to apply for bank financing at the time of transaction, either in-store, online, via call center or even at home. This flexible payment option breaks down the total cost of a purchase into smaller, more manageable payments, typically spread over a few weeks or months.

For larger ticket purchases, there’s the option of a longer-term installment loan or line of credit, while for smaller ticket purchases, the customer can use a split pay option.

The Growth of POS Financing

The adoption of POS financing has skyrocketed. The holiday season, in particular, sees a substantial increase in the usage of pay-over-time options, with a study by Adobe Analytics noting a 45% surge in BNPL transactions during the 2022 holiday shopping period.

The appeal of POS financing to consumers lies in its convenience and affordability. This appeal is particularly pronounced during the holiday season when shoppers face the pressure of higher spending.

The Golden Opportunity for Merchants

For merchants, the holiday season is a golden opportunity to maximize sales, and POS financing can be a catalyst for this. Here’s how:

  • Increased Sales and Average Order Value: POS financing can significantly boost sales. Forrester Consulting reported that merchants experienced a 32% increase in sales after implementing pay-over-time services.
  • Enhanced Customer Loyalty: Offering POS financing can enhance the customer shopping experience and build brand loyalty, when it’s a white-labeled offering. By providing a seamless and flexible white-labeled pay-over-time option, especially important during the financially stressful holiday season, merchants can boost their customer loyalty and satisfaction and drive repeat business.

    Since data by Ascent shows that 61% of BNPL users would rather utilize this payment option if it’s provided directly through the retailer’s own customer journey, instead of directing them through a third-party BNPL provider, merchants should look to rather embed bank financing within their native customer journeys with white-labeled solutions.
  • Attracting a Broader Customer Base: Point-of-sale financing options can attract a broader range of customers, including those who are credit-averse or have limited access to traditional credit. This inclusivity can be particularly beneficial during the holiday season when a diverse range of shoppers are looking for accessible financing options.

4 POS Financing Best Practices for Merchants

To fully leverage the potential of point-of-sale (POS) financing during the holiday season and beyond, merchants must adopt a strategic approach. Here are expanded best practices for integrating POS financing into your business:

1. Choose the Right Financing Partner

Selecting an appropriate POS financing provider is crucial. This decision should be based on several key factors:

  • Reputable Lenders: Customers are showing a preference for point-of-sale financing options from trusted banks and lenders. Your point-of-sale financing technology provider should empower you to offer loans and credit from regulated lenders and tier-1 banks to your customers.
  • Alignment with Business Model: Your financing partner should complement your business model. For instance, if you’re an e-commerce platform, look for a provider with a strong digital interface.
  • Ease of Integration: The POS financing solution should integrate seamlessly with your existing systems. This includes compatibility with your online shopping cart and in-store payment systems.
  • Variety of financing options: In order to hyper-personalize your offering to cater to different customer needs, credit profiles, products and ticket sizes. you need to look for a point-of-sale financing provider that supports a broad variety of financing programs, including installment loans, lines of credit, split pay (Pay-in-3 or Pay-in-4), and business loans for B2B sales.
  • Terms and Conditions: Evaluate the terms offered to your customers, such as interest rates, payment schedules, and late fees. These terms should be competitive and fair to ensure customer satisfaction and repeat business.

2. Educate Your Customers

Awareness is key to adoption. Your offering should educate your customers about the availability of financing, before they even get to the checkout line:

With in-store signage, you can increase customer awareness and usage of your financing options.

For online sales, financing widgets displaying the financing options from the product pages through to checkout can increase adoption rates as well as drive average order value and sales.

3. Monitor and Analyze Financing Data

Data is a goldmine for understanding customer behavior:

  • Sales Impact: Regularly monitor how POS financing is affecting your sales. Look for trends like increased average order values or higher conversion rates.
  • Customer Behavior: Analyze which products or services are more frequently purchased with POS financing. This can help in tailoring your inventory and marketing efforts.
  • Feedback Loop: Collect customer feedback on their experience with POS financing. This can provide insights into what’s working and what needs improvement.
  • Adapt Strategies: Use the insights gained from data analysis to refine your marketing, sales, financing and operational strategies.

4. Offer a Seamless Checkout Experience

The checkout experience can make or break a sale:

  • Simplicity and Speed: Ensure the application process for POS financing is straightforward and quick. A lengthy or complicated process can deter customers. The payment and purchase itself should be as seamless as with any credit card transaction.
  • Integration with Online Platforms: For online merchants, ensure that the POS financing option is integrated within the checkout process in a way that is easy to understand and use.
  • Transparency: Clearly display all terms and conditions associated with POS financing at the point of checkout. This includes any interest rates, fees, and repayment schedules.
  • Mobile Optimization: With the increasing use of mobile devices for shopping, ensure that your POS financing option is optimized for mobile users.

Wrapping Up

By carefully selecting the right financing partner, educating customers and analyzing data, merchants can effectively implement POS financing and reap the rewards. This not only enhances customer loyalty but also drives sales, especially during the lucrative holiday season. Remember, the goal is to make the purchasing process as smooth and appealing as possible, encouraging customers to spend more responsibly.

Disclaimer: The information in this article is for informational purposes only, and should not be construed or relied upon as legal advice on any subject matter. The author is not responsible for any consequences whatsoever arising from the use of such information.

Jifiti is transforming point-of-sale financing with cutting-edge technology, data and BNPL solutions.

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