Today, consumers seek both digital ease and total flexibility, driving the growing popularity of the Point-of-Sale financing, also known as Buy Now Pay Later (BNPL). A Juniper Research report predicts spending to surge from $112 billion in 2022 to $437 billion by 2027—an increase of more than 290%. And It’s not just the younger demographic; one in four (25%) consumers between 18 and 65 express a preference for places offering ‘buy now, pay later’ options.
So, the numbers are clear. People expect retailers and service providers to offer BNPL or financing options at the checkout counter. If you’re a business, big or small, and curious about a BNPL or POS financing solution, here’s a rundown of what those options are and how you can easily implement one into your business.
What is POS financing?
Point-of-Sale (POS) financing or a BNPL solution allows customers to obtain financing or credit at the point of purchase and spread the cost of the purchase over time through installment payments. Many consumers take this option when the price of the purchase is bigger than normal like a car, a piece, something for the home, or costly electronics. In other cases, customers may need a flexible option to pay for medical services, education, or even legal services.
While the concept of credit and installments is nothing new, these kinds of transactions are no longer exclusively in the realm of banks or financial institutions. Today, any business, big or small, vendors, merchants, or service providers can implement various types of POS financing or BNPL solution. Some through third parties, some through their own developments, and some by leveraging new and advanced technologies that enable approval, installments, and the management of payments.
The key features of POS financing or BNPL solution include:
- Immediate Approval: Customers can often receive quick approval for financing, sometimes within minutes, making it a convenient option for spontaneous purchases.
- Flexible Payment Plans: POS financing allows customers to repay the purchase amount in installments rather than making a lump-sum payment, providing flexibility and affordability.
- Integration with Retail Transactions: The financing process is seamlessly integrated into the point-of-sale system, allowing customers to apply for credit while finalizing their purchase.
- Interest Rates and Terms: The terms and interest rates of POS financing can vary based on the financing provider and the specific terms agreed upon between the customer and the lender.
- Digital Processes: Many POS financing options leverage digital platforms, enabling online applications and approvals, contributing to a smoother and more efficient customer experience.
Why Implement POS Financing Options?
Increase in Sales
One of the primary advantages of POS lending software is its ability to drive sales. By offering customers with installment options, merchant sand service providers can accelerate the sales process. Implementing POS financing or BNPL system can typically result in a 32% increase in sales. As a business, implementing flexible payments systems means not only increasing your likelihood of sales, but also allows you to expand your customer base and reach more people..
Increase in Revenue
According to a Forrester study, companies providing point-of-sale finance report a 75% increase in order value and an impressive 726% return on investment. For lenders, this translates to more lucrative loan deals when retailers sell higher-priced items. With extended payment periods, customers can afford higher-priced products and services, leading to a boost in overall sales and average order value.
Enhanced Customer Experience and Loyalty
The accessibility of point-of-sale financing contributes to building long-term relationships with customers. Whether online or in-store, point-of-sale consumer financing enhances the overall customer experience. Users can secure loans without the hassle of direct lender applications, bypassing lengthy processes and waits in banks. Immediate access to funds and transparent payment responsibilities results in a positive customer experience, fostering loyalty and encouraging repeat business.
Different Types of POS Financing and BNPL Solutions
When selecting a BNPL or POS financing option for your business, it’s good to explore what’s available and choose the model that suits your business best. Different market segments have different needs and priorities, both from a merchant and consumer point of view. Here are five commonly used models:
Integrated Shopping Apps
Large pay-in-4 BNPL providers like Klarna and Afterpay operate through multifaceted platforms, such as marketplaces, or super apps. Engaging consumers at every stage, they leverage attractive affiliated marketing campaigns and cross-selling credit cards and financial products. Traditional players need to compete by addressing the entire purchase journey, focusing on shopping cart integration, user-friendly apps, and robust self-service customer support for success.
Virtual Rent-to-Own (VRTO)
VRTO models let consumers pay gradually for desired items, signaling completion upon final payment. With a 30% to 35% CAGR, VRTO targets subprime consumers, mainly those with poor credit. Despite quick approvals and flexible payments, APRs are not reduced, but VRTO players offer discounts to prominent sellers. Leading BNPL players using VRTO include Acima, Acceptance Now, and Progressive Leasing, integrating both in-store and online services.
Vertical-Focused Larger-Ticket Plays
Specialized financing for larger-ticket purchases, termed vertical-focused larger-ticket plays, is best suited for ticket sizes ranging between $2,000 to $10,000. These solutions are found in sectors such as healthcare services, education, home improvement, and construction. The larger categories include heating, ventilation, and air conditioning (HVAC); windows and doors; roofing and siding; and remodeling. Players tend to achieve scale through partnerships with original equipment manufacturers (OEMs).
Implement InCharge into Your POS
If you’re looking to leverage a flexible BNPL or financing system into your point-of-sale, consider InCharge. Our configurable platform is designed to fit your business needs so you can cater to your customers in the best way possible. Through a simple-to-implement and easy to use installment management solution, you can leverage smart credit decision-making, offer tailor-made installment plans, easily manage payments, and collect useful data.
With our built-in BNPL solution, strategize prices accordingly, bundle goods and services in new creative ways that bring in more revenue. Gain full control, flexibility, and security over how you charge your customers, so you can remain in charge.
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