What Is PoS Financing and How Does It Benefit Consumers?

As a small business owner, providing quick access to point-of-sale or PoS Financing to your consumers can transform your company into a money-making machine. Financing portals are familiar to larger firms and retail chains, which frequently provide their own in-house lines of credit. For many small businesses, however, this can be a capital-intensive activity that not only puts your company at risk but also puts your customers at risk due to high APRs. Aside from these issues, customers are increasingly turning away from traditional credit cards and unsecured loans in favor of more accessible, customized financing choices.

What is PoS financing?

When a merchant offers its consumers a financial option at the point of purchase to aid them in purchasing a product or service, this is known as point of sale financing. Consumer finance that includes open-loop credit cards, closed-loop store cards, and installment loans is referred to as the point of sale financing. PoS loans have been around for a long time, and are commonly used for significant purchases such as furniture and automobiles. However, thanks to technology advancements, PoS financing has grown in recent years, with installment loan alternatives available immediately online and on mobile phones, with explicit payback terms before the loan is taken out. These advancements have also made it easier for various types of retailers to offer point-of-sale financing.

Popularity of PoS

Because of the unique relationship that current consumers have with credit, PoS loans are becoming increasingly popular. On one side, millennials are wary about taking up a credit card or taking out a loan. This is because they witnessed their parents struggle financially as a result of these loans during the 2008 financial crisis. These customers, on the other hand, desire to splurge on special moments in their lives. Millennials are wary of borrowing in general, but they are willing to take out a loan for special occasions such as weddings, college, or buying their first house. This creates an odd situation where you need credit for a specific transaction but doesn’t want to deal with the trouble of applying for a personal loan. The existence and quick rise of consumer loans can be traced back to this atypical customer behavior.

How to implement PoS Financing?

PoS financing can be easily integrated throughout a customer’s checkout process, especially when purchasing anything online. A retailer can partner with a lending institution such as a bank or a non-bank financial company (NBFC). They can then give the customer a point of sale financing option at any point during their purchasing experience, from product selection to checkout. The duration of the payment, as well as the terms and circumstances, can be clearly stated.

The loan is accepted by the lending institution if the customer agrees to the terms and conditions. Instead of dealing with the retailer, the customer deals directly with the lender. The lending institution is the one that pays the firm. Customers can also apply for a PoS loan in-store or via mobile phone if the retailer allows it. The benefit of an online closed-end product over an open-end private label credit card or store-branded card is that, in addition to being transparent, it is quick and convenient for the customer, resulting in customer loyalty and retention.

Benefits of PoS

It’s simple to see why point-of-sale financing is so popular, particularly among businesses that work with third-party lenders. It’s a win-win situation all around. The business owner will not have to invest as much to provide the service and will still reap the benefits, the third-party lender will receive a steady stream of leads without having to spend as much money on marketing, and the customer’s quality of life will improve as a result of better access to products and services.

1. Increase Sales

Consumer PoS financing is well known for driving sales. These buy now, pay later plans to allow clients to take advantage of items and services without having to pay upfront. According to recent statistics, online merchants who use PayPal and Bill Me Later saw a 32 percent increase in sales. This was true for sales made through a browser or on a mobile device. We couldn’t locate any recent figures on the impact of point of sale financing on offline sales, but it’s not unreasonable to imagine that the outcomes would be similar. At least, that’s what we’ve learned from other business owners we’ve interviewed.

2. Boost the Order Value

PoS financing has an impact on more than just a company’s total sales. It can also raise the value of an order. The average amount you make every sale transaction is the order value. That’s because, when you increase the consumer’s purchasing power, it’s only natural for him to want to buy more and get the most out of a single transaction, especially if your PoS’s rules prevent him from making another purchase until the previous one is fully paid. In fact, according to the same numbers we mentioned earlier, companies that accept PoS financing saw a 75 percent boost in average order value.

3. Increased Customer Retention

What motivates a buyer to buy something? Affordability, openness, and efficiency are all important factors. Putting the purchasing power back in the hands of the customer goes a long way toward ensuring repeat business. Online and in-store, PoS financing delivers a positive consumer experience. They can apply for the loan right away, without having to go through lengthy processes or wait in lines at banks. The approval is instantaneous. To top it off, consumers are provided complete information as to what their monthly payment responsibilities would be, with no hidden expenses. Using a reputable point of sale financing partner allows you to tap into your customers’ needs, making it much easier for your company to form long-term partnerships with your target market.

4. Credit Checks Require Less Admin

As previously stated, there are a few drawbacks to providing traditional in-house credit, such as a shop card. It may be a pricey exercise to set up for small firms, and it comes with a lot of unneeded paperwork. This option necessitates the completion of application documents, as well as the responsibility for conducting credit checks. To begin, you’ll need to evaluate who is a reputable credit check bureau, how much risk is involved in providing credit, and how much credit you can offer the customer. These issues are completely eliminated with PoS financing.

The advantage of point of sale financing is that the customer gets the product or service they want or need right away, and you get paid upfront as the merchant. Our simplified procedure makes borrowing easier for consumers while also allowing you to build and grow your organization by addressing a market need.

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