4 minute read
If you’re on the fence about offering a customer financing option, consider this: 30% of shoppers using consumer credit said they would not have made the purchase if a financing option weren’t available. Not only do you get more orders, but also the average value of each order increases about 15% when retailers offer a financing option.
In-house financing used to be limited to only the largest retailers. However, as a result of recent advancements in payment technology, it is now possible for nearly any business to offer their customers a financing option at an affordable cost for both the retailer and the customer.
But with more than a handful of consumer financing providers out there, what should you keep in mind while choosing one? Here are 4 points to contemplate.
1. Impact on Customers
Price is one of the biggest factors in determining if a customer will make a purchase, and nothing makes a $2,500 couch seem more palatable than seeing it broken into affordable monthly payments. You can leverage this behaviour by showing the monthly financing price alongside the full purchase price to give customers an idea of how this purchase could fit into their monthly budget.
Another hugely important consideration is the interest or fee charged to the customer. Each provider will have different payment terms in regards to how much and how often they charge customers. There are also differences in the types of fees the customers are subject to as some use an APR, similar to credit cards, while others, like FuturePay, use simple flat fees. As a retailer, you don’t want your customers to have their money tied up in interest charges and other fees, so look for the provider that has favorable terms for the customer.
2. Ease of Use
A common point of differentiation among customer financing providers is the ease of customer application. Some financing options require several pages of paper work and can take multiple days before the customer finds out if they are approved or not. Alternatively, some financing options can take as little as a few pieces of information and a few seconds before approval.
Because the goal of any financing option is to increase sales, ease of application is an important factor for your business. How will wait times and form length influence your customer’s willingness to use the financing option? If they are purchasing a $20,000 car then it probably doesn’t matter much. But if they’re simply trying to pay for a $500 purchase over the next few months then they may not see it as worthwhile given the effort required.
Another factor impacting the ease of sign up is that some financing options require customers have a smartphone to receive an authentication code. While this a relatively minor step, it does require customers to take an additional action and assumes that they have a smartphone in the first place. By keeping overall ease of use in mind, you will help to ensure you have an excellent customer experience.
3. Flexibility in Marketing and Branding
If you are going to offer a consumer financing option, it should fit naturally within your website and online store. In that regard, you might want to consider the flexibility in marketing and branding that various consumer financing companies offer.
First of all, some providers are flexible in allowing your business to white label the financing option. That is, they will allow you to brand the financing option as if it was offered by your company. With this small change in messaging, the financing option is projected as coming from the retailer rather than a third party. While it may seem like a subtle difference, having this flexibility is helpful to being able to ensure the financing option fits with your overall image and brand.
Being able to use creative and enticing messaging is equally important. Whereas some financing providers will want you to use one of their premade banners, others will work with you to create effective and enticing marketing materials that fit your store. Imagine you were selling bikes – does the message “Buy Now and Pay Later” work best? Or perhaps “Get Your Dream Bike Sooner”? Maybe something entirely different? You should have the flexibility to market this new payment option in the way that fits best with your existing marketing strategy.
4. Simple to Explain
More often than not, customers won’t immediately think of asking for a consumer loan in order to make or increase their purchase. This means that you need to design your website and train your customer support team to inform your customers of this option and initiate the conversation when appropriate.
How does this influence your choice of consumer financing services? Look for ones with comparatively simple terms. You can assist this by looking for financing partners with easy to understand terms and conditions: your customer support team will like it because they can easily explain the payment method and your customer will appreciate the added transparency. Simply put, if your financing option is confusing and difficult to understand, then customers will likely be hesitant to use it.
Concluding Consumer Financing
Flexible, customer-friendly financing options are a great way to help customers overcome price concerns. But choosing the right financing provider is key to ensuring you get the most out of it. Consider the differences in providers and their impact on your customer experience.
Perhaps the best part about offering consumer financing is that it is a win-win. Your customers benefit from an increase in purchasing power and flexible monthly payments – and you, the retailer, benefit from more sales and larger orders.
Interested in adding a modern financing option to your store? Learn more about how FuturePay can help grow your business with flexible payment options.
P.S. Enjoy this post? You’ll love How Customer Financing Impacts Ecommerce Sales