As US consumers had prepared to spend an estimated $18.5 billion on BNPL services this holiday, banks had faced a crucial challenge: how can they offer flexible lending without contributing to worsening debt cycles?
With over 10 years of experience in the Fintech world, and having worked with key players like FIS and Mastercard, Yaacov Martin, CEO of The Jifiti Group, shared insights on with CI on how personalized POS financing can align with customers’ credit profiles and boost trust.
Martin commented on using tech in order to offer real-time, responsible credit solutions without creating debt cycles. He touched on how seamless, streamlined lending at checkout can enhance customer experience and loyalty.
According to Martin, these strategies will guide banks in supporting consumers while fostering long-term relationships.
Our conversation with Martin Yaacov is shared below.
Crowdfund Insider: What are some financing options from banks that can help merchants attract customers and boost holiday conversion rates?
Yaacov Martin: Banks can help merchants attract customers and boost holiday conversion rates by catering to consumers that need affordable financing options for bigger-ticket items, as many consumers wait for the holiday sales to purchase big items such as large appliances and furniture.
Installment loans or lines of credit offered at the point of sale allow customers to break down the cost of larger purchases into manageable monthly payments, helping merchants increase sales, average order value, and customer satisfaction.
If the merchant’s customers are businesses, banks can look to offer embedded B2B financing programs. B2B financing typically entails an admin-heavy process, however business buyers have come to expect the same smooth embedded financing experience that they get as consumers.
By making their loan programs, such as working capital, deferred invoices, or lines of credit, a seamless part of the customer’s online and in-store journey over the holidays, banks can help merchants increase their B2B sales over a time when retailers often struggle with cashflow gaps. These loans enable retailers to pay for the increased inventory needed for the holidays until they are able to sell their surplus stock.
Crowdfund Insider: How does a revolving line of credit help merchants retain customers post-holidays?
Yaacov Martin: Closed-loop virtual cards are digital cards that can be limited to a specific merchant or store. By offering customers a revolving line of credit on a closed-loop virtual card, merchants can ensure that customers return to their store or website to spend their available funds.
It also keeps the merchant’s brand ‘top of mind’ as the customer is exposed to the brand on an ongoing basis and the merchant maintains a recurring touchpoint with that customer via repayments. By integrating these virtual cards into digital wallets, merchants give their customers convenient access to their revolving lines of credit and enable them to ‘tap to pay’, just like they would with any card transaction.
Giving the customer the ability to put their credit line into their wallet ensures that the customer literally carries the merchant’s brand with them at all times in their mobile phone, giving them a reason to spend at that merchant at any time.
Crowdfund Insider: How can lenders and merchants create financing offerings that resonate with shoppers’ unique preferences, credit profiles and purchases?
Yaacov Martin: Lenders and merchants can create bespoke financing options by analyzing customer behavior data and preferences. In doing so, they can ensure that the right offer is presented to the right customer at the right time.
SKU-based financing algorithms is another tool that can help the merchant and lender match the financing offering to a specific product, for example, a refrigerator is better suited to an installment loan, while a gaming console can be paid off with a pay-in-3 or pay-in-4 option.
Additionally, a multi-lender solution brings together a combination of lenders and loan programs to optimize the offering. It provides flexibility and wider loan access, catering to diverse customer needs and credit profiles.
Crowdfund Insider: What role can digital wallets play in increasing financing adoption and utilization rates over the holidays?
Yaacov Martin: Today’s consumers often leave home without a physical wallet, relying instead on the convenience of tapping their mobile devices to pay using digital wallets both in-store as well as online.
Additionally, there’s a growing demand for pay-over-time options – global BNPL usage is expected to grow from 380 million users in 2024 to 670 million by 2028, an increase of 107%. Banks and lenders that cater to both these preferences are strategically positioned to increase their financing adoption and utilization rates over the holidays.
By provisioning their financing options to the customer’s digital wallet, the customer is not only more likely to actually use their available funds, but is also more likely to apply for the financing from the outset, knowing that they will experience a seamless, familiar payment journey.
Crowdfund Insider: How can banks, lenders and merchants prioritize consumer protection over the holidays (i.e. protecting them from debt while giving them the access to financing that they need)?
Yaacov Martin: To provide customers with accessible, responsible financing options over the holiday season, merchants can offer point-of-sale financing products from reputable banks and lenders that consumers trust. Banks are able to provide competitive interest rates to customers, as they have a low cost of capital and unparalleled balance sheet strength.
They also have centuries of underwriting experience, enabling them to make informed decisions and underwrite loans with terms that prioritize consumer protection.
As another layer of consumer protection, merchants can also tailor the offer to the right consumer credit profile and purchase, for example, by offering a long-term loan with an APR for larger purchases and a split pay option with 0% APR for smaller purchases.
This increases the likelihood that the customer is receiving a loan or credit option that they are able to repay and that makes sense for their specific purchase scenario.
Additionally, working with a solution that encompasses anti-fraud measures, meets Know Your Customer/Business (KYC/KYB) requirements, and leverages open banking technologies can optimize decisioning and minimize credit risk and default rates.
This combined approach to consumer protection enables consumers to access the credit they need for the holiday season while incorporating measures to safeguard their financial well-being.