Who will lead the way in POS consumer financing?

The competition for who will lead the way in point-of-sale (POS) consumer financing is heating up with both fintech startups and retailers scrambling to supply and demand respectively. And there is no question as to why all efforts are being thrown in this direction: POS lending has indeed become mainstream due to more consumers seeking transparent credit options, and merchants capitalising on this widened customer base and opportunity to boost sales. In fact, POS lenders have raised more than USD 700 million since 2017, according to CB Insights data.

Market players, such as PayPal, and banks appear to have missed the boat for implementing POS financing, due to their slow move into this financing space, despite being perfectly positioned to conquer it. Instead, it has been fintech at the forefront of this particular payments race devising new ways to innovate for consumers at the checkout. However, whether it’s by teaming up with these influential fintech companies, or by using their head start as a recognised payment at most checkouts worldwide, now even the big bank branches are reinventing their strategies and stepping up their game.

So, is it the fintech startups vs banks? Or a combination of the two? Who will we see lead the way in POS consumer financing in 2019?

Fintechs are quick out of the box

With a huge millennial consumer base and impressive digital offerings, fintechs have been best positioned to break into POS consumer financing. The last couple of years in particular have seen more fintechs delve into the POS world, with the likes of Square having recently launched Square POS. Founded by Twitter Chief Executive Jack Dorsey, Square’s flagship technology now enables customers of its small-business clients to pay for purchases in installments.

In 2019, mobile challenger bank N26 has raised USD 300 million in a Series D funding round taking the fintech’s valuation to a mighty USD 2.7 billion - the highest in Europe. N26 has announced that they will use this funding to expand into the US market later in 2019. Europe has traditionally dominated in consumer finance disruption and is home to many more players specialising in POS financing. Klarna, for example, is leading the way thanks to their checkout solutions for merchants improving conversion rates, and consumer-finance solutions, such as installment loans.

Banks are gaining momentum thanks to fintech partnerships

Traditional financing options available to consumers at POS from banks are typically credit cards, overdrafts or bank loans. Due to the sheer amount of paperwork, time, and added fees involved in these loan approvals, banks do not hold much of a chance in leading the way in the POS consumer space. Consumers expect an instantaneous and digital lending at checkout and, more importantly, transparency on the total cost of purchase.

That being said, credit card companies have always had an advantage in the POS financing space, considering they are already accepted at every single checkout worldwide. Those that find a way to benefit from this head start will be clear contenders to capture the POS consumer financing market.

One such winning move is partnering up with a fintech. Banks still hold the title as the biggest lenders around, but they simply do not have the technology to bring their loan programs to a retailer’s POS with the digital user experience that shoppers expect today. These partnerships allow a bank to be at the POS by utilising fintechs as technology enablers between their funds and the retailer’s systems. It can also help banks prioritise an advanced mobile-first POS financing approach.

Banks are awakening to the idea that fintech disruption poses less as a threat, and rather as potential end-to-end solution. In 2018, Mercantille Bank of Michigan joined forces with Orlando-based fintech startup Abe.ai to improve the financial health of the bank’s customers and drive higher customer engagement. At Jifiti, we partnered with Mastercard to implement a consumer financing platform to customers.

Winning over merchants to go the extra mile

Those that are able to capitalise on ROI for merchants have a clear shot in leading the way in POS consumer financing. Building a platform that benefits the merchant is as important as building one that benefits the consumer. These loans can help merchants drive sales by offering customers instant loan approvals at no extra cost. Companies implementing these POS financing options can see up to 32% increase in sales. Therefore, POS lenders who are able to demonstrate and commit to this ROI will have more merchants on their side, allowing them to thrive.

Greensky, a financing platform for service providers, namely contractors and home improvement, has been at the forefront of this strategy. The fintech’s platform lets home improvement companies offer instant loans and lines of credit to their customers. Thanks to huge consumer growth and high ROI, Greensky has had partnerships with over 16,000 merchants. Fintechs truly hit gold when merchants are lining up for partnership deals in point of sale.

Greensky is a perfect example of a fintech bringing financing to a traditional retail moment of sale, but to a service who uses their platform separately. The fintechs that will truly deliver on POS consumer lending are the ones that bring traditional financing with the best digital experience and the least integration barriers to POS. Credit card networks are already positioned at POS, and traditional banks have the funds. Therefore, these players that can partner with fintechs and enable the two to connect seamlessly, incorporating a streamlined customer experience, will be well positioned to lead the way in POS consumer financing.

About Nufar Segal Bareket

Nufar Segal Barekt is GM Consumer Financing at Jifiti. She is a B2E business lead, with vast experience in fintech verticals, and a proven track record in generating substantial growth and leading revenue operations from small/medium phase to full scale businesses. She is an expert in consumer finance across debt, wealth, and POS financing in the US and European regions.

About Jifiti

Jifiti is redefining retail experiences by combining cutting-edge design and technology with fintech infrastructure. Our platform requires zero integration with existing POS and ecommerce systems and enables retailers and brands to test, launch and roll out retail solutions within a very short amount of time.Our platform includes Zero-Integration POS financing, and end-to-end retail gifting solutions (Gift registry, ecommerce gift checkout, first party gift card solutions).