With rising living standards, there is less disposable income available to an average consumer. According to OECD, there was a substantial reduction in household consumption in the spring of 2020. Traditionally, businesses collaborate with lenders to provide financing to help consumers buy something they could not afford otherwise. But financing is usually only available for bigger purchases and requires extensive vetting and credit checks.
With recent financial technological innovation, most e-commerce businesses these days can begin to implement this strategy and some have integrated consumer financing as one of their payment checkout methods. This unique strategy allows shoppers to pay for their purchases over an extended period of time instead of paying upfront, which benefits both shoppers and businesses.
Payment plans are especially appropriate for expensive products. Without them, some shoppers are less inclined to purchase expensive items. For instance, if a customer wanted to purchase a $3,600 couch, but it did not fit their budget, they could pay for the couch over a 36-month term for only $100 a month interest-free using a payment plan.
On the one hand, shoppers gain the financial flexibility to enjoy their purchases sooner and pay later. On the other hand, consumer financing can increase order value, business cash flow, customer satisfaction and business revenue. There is also the potential added benefit of tax deferral for revenue (For actual application, please consult a registered accountant).
Another advantage of consumer financing is to give businesses a different type of revenue with projected predictable income being actualized as time goes by. With automated debt collection mostly guaranteed by fintech, business owners will not need to chase down customers and can receive payments without delay.
The option to pay for purchases in an installment will give customers financial freedom and flexibility. Customers who feel like they are in control, and are valued by a particular business, tend to become loyal repeat customers. When customers are offered seamless and suitable payment options, they are more likely to buy.
From fashion to travel, Financial technology companies like Affirm and PayBright help businesses easily implement payment plans. According to PayBright’s website, its implementation helped increase merchant’s repeat customers by 20% and average order value by 30%. Consumer financing companies such as PayBright also accept the risk of consumer loan default and fraud so that businesses do not have to worry. Affirm, another fintech company provides simple fee structure with fast and simple integration.
Businesses that consider integrating consumer financing to reap the many benefits can contact one of their local web service specialists for implementation details.