Point of sale lending is set to take center stage. And all eyes are now on its next big leap, which is scale.
As more arrangements are made between lenders and merchants to catalyze lending options, the focus has moved toward merchant acquisition, onboarding and management. POS lending's next big disruption lies in how lenders can eliminate integration and therefore scale their growth.
Consumers lining the till this holiday season will be spoiled for choice in terms of payment options as more merchants crack down on their own “buy now, pay later” services.
POS consumer lending is not a new phenomenon. Car dealers, furniture stores, even orthodontists have long been offering flexible loans allowing shoppers to fulfill their financial needs without the worry of hidden fees and compound interest.
However, POS lending has now become the most natural and effective consumer interaction point to offer financing. It is therefore attracting interest from banks and fintechs, and heading in new directions.
Already, one-off installment loans are gaining traction thanks to a clear fees structure and detachment from physical credit cards. Just last month, the payments company Square, launched a consumer-side lending service called “Square Installments,” which offers credit to individuals at an interest rate between 0% and 24%.
Even incumbent banks, whichuntil recently were focused on refinancing and general use loans, are now entering the POS loans market because of the favorable cost-of-customer-acquisition and lower credit risk. While banks pile in, third-party vendors are lining up with their innovative breakthroughs in underwriting and their abilities to approve potential borrowers in seconds.
One challenge that awaits lenders is the amount of effort and resources required to market to and integrate with a new client. A new trend we are seeing is how lenders can work around this and eliminate points of POS integration financing. Being able to show that the solution can work seamlessly with the merchant’s existing systems creates ease and enables lenders to onboard and manage merchants at scale.
Once integration has been knocked down, and merchants have the tools to self-manage the platform efficiently, lenders can look toward expanding the breadth of their product and service offerings. A scalable digital platform is the trigger to financing more consumer purchases through retailers, resulting in diversification for lenders’ leading portfolios and increased loan revenue.
With holidays approaching, and consumers looking to avoid a financial hangover of carrying credit card balances, more merchants will adopt POS lending to supply their customers with alternatives at checkout. Lenders able to serve up a self-service platform that requires zero integration and is scalable will be ahead of the game — the pioneers in POS lending’s next big leap.
