American consumers are unquestionably big fans of credit, with almost a quarter of all purchases made using credit cards in 2019. But, while most consumers are comfortable pulling out their plastic and enjoying the benefits of accessible credit, the sting of high-interest rates can still be a major purchase deterrent – especially on large purchases. But, what if there was another way for consumers to quickly and easily access manageable credit right at the point-of-sale, without the need to fill out long applications or submit stacks of documentation? That low-friction credit option already exists. It’s in its infancy, but POS financing – installment loans provided to customers right at the cash register – could be the next big thing in consumer payments.
POS Financing: A New Way to Pay
The idea behind POS financing, and a push towards installment financing across retail in general, is to provide consumers with a new way to pay for large, infrequent, or one-time expenditures. POS installment financing is an emerging, but still highly untapped market, which Accenture has previously projected could be worth as much as $1.8 billion. That makes it no surprise that major players like Mastercard and JPMorgan Chase are moving to grab a piece of the market early.
Consumer installment financing isn’t new, and is extremely common for things like car and major furniture purchases. But POS financing aims to bring installment loan options to a wider subset of consumers in a wider number of retail sectors by enabling them to pay for any large purchase over a longer period and with set monthly charges rather than the application of interest to a credit card balance. That could revolutionize the way people pay for everything from expensive musical instruments to luxury vacations.
For merchants, POS financing represents a way to offer customers even more flexibility – something the modern consumer both appreciates and, in many cases, expects. It could be the difference between a customer passing on a purchase that might result in exorbitant interest fees on a credit card, or pulling the trigger thanks to more manageable, longer-term payments.
Integrating POS Financing for Retail Merchants
Some merchants looking to offer financing to their customers run in-house programs and partner with a major lender to underwrite the loans. However, POS financing is now moving to a simpler third-party service model, in which retailers integrate their POS systems with middleman software or direct services designed to link the consumer and a lender right at the checkout. Getting set up with POS financing only requires merchants to partner with one of those third-party providers.
The number of offerings in the market is rapidly expanding, but today, some of the most popular POS financing providers include Klarna, a Swedish bank, Afterpay, and Affirm. Another industry leader, Vyze – a POS lending middleman – was recently acquired by Mastercard to help the credit giant expand into the growing consumer loan space. Once a merchant has chosen a service provider, integration with their POS system can be done in a number of ways depending on the provider. Klarna, for instance, offers an API for integration directly with the merchant’s in-store systems. Afterpay offers a unique app that customers use to generate a special barcode that merchants can then scan to process purchases through. When the sale is completed, customers then make all payments directly to Afterpay.
How BAMS Can Help
BAMS is the ideal partner for merchants looking to get into POS financing, both online and in-store. Not only does BAMS offer transparent interchange-plus pricing and guaranteed low transaction fees, we also offer easy and widespread POS integration across all the most popular systems in the retail sector. Our expert development managers have the experience and expertise necessary to offer you the advice you need to select the right POS system and the right POS financing partner. That ensures BAMS merchants will always benefit from not only the lowest possible transaction fees, but also the right hardware and the best third-party integrations for their needs.
To find out more about how BAMS merchant services can help your business begin offering your customers the flexible payment options they need, including POS financing, visit BAMS.com today.