Retail Financing: Save Time and Money with AI-Powered Point-of-Sale Lending

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“Retailers should understand that the leaders in retail-based installment lending, aren’t the only games in town — especially not for retailers eager to keep the fees of 2% to 6% these vendors typically charge on transactions.”

For retailers, there are obvious benefits to offering point-of-sale loans to customers, and key players in the business of providing and administering installment loans as outsourcers happily tout these good points. But the external lenders who dominate this burgeoning space aren’t the only alternative for retailers in search of point-of-sale lending options — nor are they always the best value.

Still, their topline case for point-of-sale loans is compelling.

Referring to stores that offer its loans, installment lender Klarna says in-store borrowers buy 68% more than non-borrowers, and claims these borrowers are 20% more likely than non-borrowers to return and purchase more items within 30 days. Overall, Klarna says retailers who offer its financing see a 58% increase in average order value.

Meanwhile, Affirm, another leading installment lender, says its retail partners enjoy a whopping 87% boost in average order value, as well as excellent word-of-mouth as measured by a “Net Promoter Score” of 83 out of 100.

Scott Galloway, a professor at New York University’s Stern School of business, offers a more modest, but still impressive, take on the matter. He says stores that offer installment loans at the point of purchase see a 20% to 30% increase in purchase value.

The growth point-of-sale lending hasn’t been bad for bank either. Regions Bank in the US saw the loan value of the subset of consumer loans that includes in-store lending go from about $880 million in the fourth quarter of 2016 to $1.4 billion a year later.

However you slice it, in-house financing helps retail operations capture business even when — in the face of declining household savings rates — they wish to spread payments for their purchases out over time. Saying “yes” to point-of-sale lending means converting leads to sales, especially for big- and medium-ticket items. It also builds client loyalty, and adds an attractive revenue stream through lending fees.

DIY

Retailers swayed by such outcomes should understand that Klarna, Affirm and Afterpay, the leaders in retail-based installment lending, aren’t the only games in town — especially not for retailers eager to keep the fees of 2% to 6% these vendors typically charge on transactions.

These companies benefit from a singular fact: issuing installment loans seems complex and stressful to many retailers, who in turn can’t imagine how else they might go about it. 

In truth, a glaring alternative for merchants in search of lending capabilities is to provide point-of-purchase lending themselves with help from a specialist technology provider, preferably one versed in the needs of retailers. If that still sounds daunting, it may be worth reviewing how the right technology partner can make things easier — and for as much as a tenth of the cost of an installment loan outsourcer.

  • Using white-label technology, backed by round-the-clock support and consultation, provides streamlined automation that cuts operational costs and increases overall returns.
  • Machine-learning algorithms minimize credit risks.
  • AI-powered workflows and intuitive interfaces eliminates human error.

With an end-to-end lending automator like TurnKey Lender in play, retailers get an AI-driven platform that addresses a credit provider’s mission-critical needs, including:

  • Dynamic risk assessment
  • Loan approvals in seconds, not days
  • Frictionless loan origination
  • Secure mobile capabilities
  • Credit-bureau integration
  • Regulatory compliance
  • Automatic notices and reporting

With a lending-technology partner like TurnKey Lender, retailers can make sales when buyers prefer to make installment payments, and keep fees and processing payments that would otherwise go to a bank. In sum, TurnKey lender goes deep into the weeds of in-store lending so you don’t have to.

That’s immensely appealing to a growing cadre of smart retailers who have come to see technology-assisted in-house lending as easy and profitable in contrast with expensive and complicated point-of-sale outsourcers.

Schedule a call today to learn more.

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