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How to Offer Instant Financing to Consumers? [5 Hints for Merchants]

The financial landscape is evolving, and many businesses are turning to instance financing to empower customers and increase revenue… Which makes some people ask if I don’t know what I want but I want it now! is the best way to describe today’s consumer behavior. Yes… and no. While the desire to receive things instantly is a natural human behavior, the post-pandemic world has made consumers more conscious, autonomous, and tech-savvy. Consumers still want things now but at the same time, they know what they want.

To meet today’s customer demands, businesses should be able to offer not only excellent goods or services but exceptional user experiences, high flexibility, and various payment options – with instant financing being one of the most popular models globally. So, let’s explore five hints on how to offer instant financing to consumers.

Hint 1: What Is Instant Financing?

But first things first! Before offering instant financing, merchants should understand its basics, pros and cons, and why they need it in the first place.

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.

Hint 2: What Customer Financing Programs Are Available?

Today, instant consumer financing, often referred to as retail financing, comes in different forms – with Buy Now, Pay Later (BNPL) being one of the most appealing upfront financing methods to increase purchasing power. Let’s not forget that purchasing via installments is a popular option among those who do not want to rely on credit cards or those who don’t have access to traditional financial services. Interestingly, Millennials and Gen Z are among the most prominent BNPL supporters as BNPL gives them the chance to regain control over their purchasing choices via convenient digital solutions.

For merchants who offer BNPL, on the other hand, it is vital to know they will be paid in full even if the customer isn’t paying upfront. Note that direct-to-merchant and direct-to-consumer financing are two traditional options in front of merchants who want to offer point-of-sale financing. Direct-to-merchant financing means that merchants are paid in full by a lender and then the customer pays back to the lender. This option, however, comes with financing limits and strict requirements, which can reduce consumer power and business flexibility. 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!

Hint 3: 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:

  1. 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.
  2. 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.
  3. 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.

Hint 4: 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.

Hint 5: 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!

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