Whether you refer to it as customer financing, flexible financing, flexible payment plans, buy now pay later or instalment plans, allowing customers to pay for products over a period of time has become prevalent in online shopping. With 93% of first-time consumer credit users indicating they would use it again, it’s not surprising that multiple online retailers, including Apple, have become early adopters of this payment option, giving them a competitive advantage at checkout. Let’s delve into the process of customer financing as well as the benefits associated with offering this alternative payment method.
While ten years ago you may have only seen financing on big ticket, brick-and-mortar items, today, flexible financing is an easy-to-use, alternative payment method for online shoppers looking to purchase anything from clothing to auto body parts. Innovative technology has allowed merchants to adopt this as an inexpensive checkout option just as easily as accepting credit cards.
Aside from easy adoption, there are many other efficiencies that have been recognized in customer financing. For consumers, signing up is straightforward and uncomplicated, allowing them to start a tab and checkout in one step, effortlessly. This may be why retailers who have deployed this flexible payment option have seen on average a 33% increase in conversions at checkout. Amazon.com has seamlessly integrated the payment option into their pre-checkout where their customers are given a financing offer. When online shoppers decide to purchase using a consumer credit option the steps are minimal.
- The consumer selects the buy now pay later option presented at checkout
- If it is there first time using this option, they are asked a few approval questions and receive an instant credit check
- If they are approved, their transaction is processed and completed
- The merchant receives the funds for the customer’s order whether they pay off their tab or not
By allowing shoppers to pay off purchases over a period of time, merchants are able to reach a more value-conscious customer demographic. Online shoppers who may not purchase otherwise are converting, and those who lean towards smaller orders are increasing order sizes. A study by Forrester indicated that offering this type of alternative payment option can result in a 15% increase in average order value and a 17% increase in incremental sales- a number that jumps to 20% during financial crunch times such as the holiday shopping season.
More so, Hitachi Capital Consumer Finance conducted a survey researching the effects of customer financing and found that 80% of respondents confirmed that offering financing strongly influenced their decision to buy from a specific retailer, with 48% spending more as a result.
With online cart abandonment increasing year over year, ecommerce merchants need to be taking proactive measures to improve conversions at checkout. Through innovative and affordable technologies, online businesses are now able to enjoy the advantages seen by offering point of sale finance options, allowing them to reach new customers and encourage large order values. By leveraging this type of alternative payment method, retailers are seeing enhanced bottom line profitability and improved revenue in addition to long-term brand value. To learn more about how offering a flexible financing option, like FuturePay, can benefit your business, please visit our retailers page.
P.S. Enjoy this post? You’ll love What to Consider When Choosing a Consumer Financing Provider