Gaining a Holiday Edge with Digital Revolving Credit

in Commerce, Media feature, Merchant, Retail

As seen in Retail TouchPoints, October 14, 2024

The world is certainly embracing digital transactions. Recent statistics show that 2.71 billion people have been shopping online globally as of 2024 — nearly one-third of the world’s population. What’s more, that number is expected to climb to 2.77 billion people in 2025, and the global ecommerce market is predicted to exceed $6.3 trillion in 2024. Many retailers will go into this year’s holiday shopping season with the hope of capturing their portion of this growing opportunity.

Fast Company recently noted that alternative financing methods like buy now, pay later (BNPL) are positioned to divert market share away from more traditional forms of payment on ecommerce purchases, including debit cards, especially for discretionary purchases such as electronics and beauty products. 

As more shoppers embrace the ecommerce experience, online merchants need to differentiate their sites as much as possible to cut through the clutter. One way to achieve this is by offering a financing option that provides enhanced benefits compared to services like BNPL at checkout.

An Alternative to BNPL

BNPL has gotten much attention in recent years, and not all of it is positive. Although this payment method has lured in customers with promises of short-term no-interest loans, BNPL providers have come under criticism for both their lack of adequate consumer protections and for their less-than-stable business models. BNPL doesn’t typically require a full credit check for applicants, leading to a reputation for providing financing to individuals with less-than-stellar credit histories. In addition, BNPL providers enforce rigid repayment schedules, with strict late fees that negate the benefit of their “no-interest” terms.

So what’s the best alternative to help merchants distinguish their experiences beyond conventional payment solutions?

A digital revolving credit financing program may present a more advantageous option for consumers, offering various benefits that BNPL’s fixed structures don’t deliver. Ideally, an API-based digital revolving credit option can be implemented by merchants in as little as a few hours, allowing for deployment in time for the holiday shopping season.

Since brick-and-mortar showroom floors tend to mount their bright-and-shiny holiday displays and promotions earlier every year, e-tailers need to be equally prescient when it comes to implementing new ecommerce features, including a more consumer- and merchant-friendly digital revolving credit option.

Increasing LTV with Digital Revolving Credit

For shoppers, a digital revolving credit offering allows them to open an account once and use that credit line over a lifetime. When a balance is paid down, the shopper can access that credit again — without having to re-apply — encouraging recurring purchases with the merchant.

Digital revolving accounts typically have flexible repayment structures that shoppers can change according to their needs. In a still-inflationary economy, the ability for consumers to adjust their repayment commitments as they go along may add some needed resilience to their budgets.

The benefits of digital revolving credit foster an increase in customer lifetime value (LTV). This ability to build customer loyalty aligns with the merchant’s profitability goals, since long-term customer retention costs are of great concern to any retailer. Digital revolving credit builds a long-term relationship with the customer, in contrast with the BNPL model, where a customer opens a one-off, short-term loan that is terminated when the balance is paid in full. The customer relationship also is terminated at that point, providing no incentive or infrastructure for a continuing history with that buyer.

Turning Shoppers into Long-Term Patrons

The objective of an ecommerce website should not just be to showcase saleable merchandise. It also should maintain the strategic objective to convert browsers into shoppers and to turn those purchasers into long-term, repeat patrons. The option to open a revolving account supports that goal and gives purchasers a structure with which to continue to make future transactions with that retailer.

This concept is particularly effective in what we call the revolving credit “sweet spot:” purchases between $200 and $500 that are not quite luxury items but are discretionary enough that shoppers might seek to finance them as opposed to making a single payment. Ideally, retailers will benefit from the recurring purchase of items that are appropriate for subscription-based or ongoing buys in this price bracket, such as high-end vitamin or skincare regimens, software purchases, educational supplies or even pre-fab meal subscription services.

With a combination of strategy and intuition, ecommerce merchants can easily increase their competitive edge, enhance the shopper’s experience, build customer loyalty and boost transactions in time for the 2024 holiday season.

Global software industry leader Tim Harris is CEO at FuturePay, providers of MyTab, a digital revolving credit ecommerce financing solution. A long-time executive and entrepreneur in the high-tech and electronic payments industry, he has overseen strategy, sales, business development, marketing and strategic partnerships at major software development companies.

As seen in Retail TouchPoints, October 14, 2024

The world is certainly embracing digital transactions. Recent statistics show that 2.71 billion people have been shopping online globally as of 2024 — nearly one-third of the world’s population. What’s more, that number is expected to climb to 2.77 billion people in 2025, and the global ecommerce market is predicted to exceed $6.3 trillion in 2024. Many retailers will go into this year’s holiday shopping season with the hope of capturing their portion of this growing opportunity.

Fast Company recently noted that alternative financing methods like buy now, pay later (BNPL) are positioned to divert market share away from more traditional forms of payment on ecommerce purchases, including debit cards, especially for discretionary purchases such as electronics and beauty products. 

As more shoppers embrace the ecommerce experience, online merchants need to differentiate their sites as much as possible to cut through the clutter. One way to achieve this is by offering a financing option that provides enhanced benefits compared to services like BNPL at checkout.

An Alternative to BNPL

BNPL has gotten much attention in recent years, and not all of it is positive. Although this payment method has lured in customers with promises of short-term no-interest loans, BNPL providers have come under criticism for both their lack of adequate consumer protections and for their less-than-stable business models. BNPL doesn’t typically require a full credit check for applicants, leading to a reputation for providing financing to individuals with less-than-stellar credit histories. In addition, BNPL providers enforce rigid repayment schedules, with strict late fees that negate the benefit of their “no-interest” terms.

So what’s the best alternative to help merchants distinguish their experiences beyond conventional payment solutions?

A digital revolving credit financing program may present a more advantageous option for consumers, offering various benefits that BNPL’s fixed structures don’t deliver. Ideally, an API-based digital revolving credit option can be implemented by merchants in as little as a few hours, allowing for deployment in time for the holiday shopping season.

Since brick-and-mortar showroom floors tend to mount their bright-and-shiny holiday displays and promotions earlier every year, e-tailers need to be equally prescient when it comes to implementing new ecommerce features, including a more consumer- and merchant-friendly digital revolving credit option.

Increasing LTV with Digital Revolving Credit

For shoppers, a digital revolving credit offering allows them to open an account once and use that credit line over a lifetime. When a balance is paid down, the shopper can access that credit again — without having to re-apply — encouraging recurring purchases with the merchant.

Digital revolving accounts typically have flexible repayment structures that shoppers can change according to their needs. In a still-inflationary economy, the ability for consumers to adjust their repayment commitments as they go along may add some needed resilience to their budgets.

The benefits of digital revolving credit foster an increase in customer lifetime value (LTV). This ability to build customer loyalty aligns with the merchant’s profitability goals, since long-term customer retention costs are of great concern to any retailer. Digital revolving credit builds a long-term relationship with the customer, in contrast with the BNPL model, where a customer opens a one-off, short-term loan that is terminated when the balance is paid in full. The customer relationship also is terminated at that point, providing no incentive or infrastructure for a continuing history with that buyer.

Turning Shoppers into Long-Term Patrons

The objective of an ecommerce website should not just be to showcase saleable merchandise. It also should maintain the strategic objective to convert browsers into shoppers and to turn those purchasers into long-term, repeat patrons. The option to open a revolving account supports that goal and gives purchasers a structure with which to continue to make future transactions with that retailer.

This concept is particularly effective in what we call the revolving credit “sweet spot:” purchases between $200 and $500 that are not quite luxury items but are discretionary enough that shoppers might seek to finance them as opposed to making a single payment. Ideally, retailers will benefit from the recurring purchase of items that are appropriate for subscription-based or ongoing buys in this price bracket, such as high-end vitamin or skincare regimens, software purchases, educational supplies or even pre-fab meal subscription services.

With a combination of strategy and intuition, ecommerce merchants can easily increase their competitive edge, enhance the shopper’s experience, build customer loyalty and boost transactions in time for the 2024 holiday season.

Global software industry leader Tim Harris is CEO at FuturePay, providers of MyTab, a digital revolving credit ecommerce financing solution. A long-time executive and entrepreneur in the high-tech and electronic payments industry, he has overseen strategy, sales, business development, marketing and strategic partnerships at major software development companies.