Extending credit may be rather complicated, and for an untrained credit assessor, attempting to estimate the risks involved can be challenging and perhaps harmful. Nevertheless, providing clients with various financing choices is often essential for generating new business. Companies may solve this problem by introducing consumer financing for merchants. It would enable the companies to supply the appropriate loan solutions, which would lead to an increase in orders and a greater number of consumers.
A consumer finance agreement is a contract in which a lender agrees to offer financing to a customer to cover the customer’s purchase of goods and services on behalf of the merchant. The consumer agrees to make predetermined and consistent payments to the creditor until they have satisfied the obligation. The following is a list of the actions that need to be taken at the point of sale (POS) to complete the consumer finance process successfully:
- The client chooses the item or items they want to buy and then moves on to the financing choice.
- The customer completes an application, which is often done digitally using a smartphone, tablet, or a computer located inside the business.
- If the lender decides to proceed with the application, they will provide the consumer with the highest possible loan amount.
- After completing the transaction, the client will assume ownership of the product.
- The borrower must make monthly payments to the creditor to clear their balance.
Your consumers will appreciate Customer Finance’s flexibility in making payments for products or services. It implies that you and your customers benefit from an enhanced position in cash flow. Provide your consumers the option to pay for their purchases over time with manageable monthly payments rather than excessively expensive If you make things easy, and they’ll purchase from you.
3 Stages of Implementation
Here you will find the 3 stages of implementation. When it comes to the credit standing of customers, the provision of consumer finance choices via a broker such as Moorgate Finance means that a larger variety of customers are likely to be approved for financing since we have a wide selection of lenders that are the ideal fit for them. Because of our quick response and extensive expertise, many different suppliers see us as an essential business partner.
Stage 1: Choose a Service Provider from the Third Party:
Obtaining the services of a third-party vendor that offers POS financing is the first step a retailer must take to put these financing options into action. The most effective method of financing for every company is contingent on several aspects, including (but not limited to): Implementation, risk, scalability, and flexibility. There is no such thing as two companies that are exactly alike, and to choose the most suitable consumer financing program, each company will place a different level of importance on the following factors:
Tools for consumer finance have to be straightforward to apply and call for a minimum of in-house instruction. Additionally, these solutions have to be user-friendly for customers and shouldn’t create any complications for the purchasing procedure.
When a merchant offers alternatives to buy now and pay later (also known as BNPL), the retailer takes on a certain amount of risk. However, this risk is considerably reduced when the retailer works with a third-party finance provider.
The boost in sales that should result from retailers having access to consumer finance should help these enterprises grow. This growth might include establishing several retail outlets, including traditional storefronts, web-based shops, and temporary pop-up shops in various locales (if a merchant needs to sell products quickly).
Even while some consumer financing platforms could limit loans to certain items, such platforms should nonetheless provide clients financing choices for smaller purchases, especially those that brick-and-mortar retailers would not finance on their own. This constraint is often a result of the comparatively high fees incurred by merchants to provide clients with minor loans.
Stage 2: Include Financing in All of Your Sales Channels:
After the merchant has located and contracted the services of a third-party supplier, they are obligated to choose the various modes of payment that are made accessible on their various sales channels. To choose such possibilities, you must first integrate any already installed systems with the newly developed platform for third-party finance. After that, retailers may add financing alternatives to customers’ product listings when they check out.
Providers of high-quality point-of-sale systems make it easier for retailers to integrate their POS systems with their current e-commerce platforms, enabling retailers to simplify the checkout process and keep their sales data in one spot.
Stage 3: Let Your Customers Know About the New Financing Options Available:
When the merchant has finished integrating the new POS systems, they need to inform their consumers about the new financing choices. Advertisement of these loan options should be done by merchants both within and outside of their physical stores and on the websites of their companies and any social media channels relevant to the target audience.
Strong advertising has the potential to persuade window shoppers to become active consumers, which is especially useful for making large-ticket purchases and purchasing online. A marketing strategy that focuses on financing may also encourage consumers to choose a company’s brand over those offered by rivals who do not provide comparable financing options.
Advantages for Merchants Associated with Consumer Financing:
When it comes to offering customer finance, merchants will find that there are a variety of perks, but the following three are particularly significant:
Customers may Buy Goods:
The ultimate goal is to increase sales, which may be accomplished by giving clients many payment alternatives for purchasing items. Customers who are otherwise unable to afford entire up-front payments (and who would otherwise leave your shop or online without conducting business) are more likely to make further purchases if offered finance plans instead of alternative payment options.
The Art of Acquiring New Clients:
Although convincing current consumers to purchase more items is essential to increasing a business’s profitability, merchants should equally work to attract new customers. If a potential consumer wants to buy anything substantial, like a new bed or washing machine, they would most likely look into financing options. If a merchant can give customers appealing financing choices, they have a far better chance of winning that customer’s business than their rivals who do not. Because they are aware of financing availability, new consumers may choose to shop at that particular establishment for future purchases of costly things.
Receiving the Whole Amount of the Payment Up Front:
Even when the customer does not pay the whole amount at checkout, the lender is still responsible for paying the full purchase price to the merchant. The borrower pays the lender in installments. The merchant receives significant benefits from this arrangement since it lowers their risk of not being repaid and boosts their current cash flow. As a result, it is much simpler for the merchant to direct resources into other elements of its operations.
The provision of consumer finance is often a vital component of the business strategy used by any retailer. It allows your consumers to buy things without putting undue strain on their financial resources while simultaneously allowing you to collect the whole amount at the moment of sale. It increases sales and money for both parties.