For small and medium-sized businesses, financing programs can be a powerful sales strategy to boost revenue, acquire new customers, and improve cash flow. Emerging data indicates that consumers increasingly expect flexible payment options, and the ability to offer financing can give SMBs a competitive edge. This article will examine the data-driven benefits of offering financing and detail best practices for implementation.
The Rise of Point-of-Sale Financing
Point-of-sale (POS) financing, which allows customers to split purchases into installments, has seen tremendous growth recently. According to Worldpay data, the total POS lending market increased 39% year-over-year from 2020 to 2021. Meanwhile, major financial services firms like Visa, Mastercard, and American Express have introduced POS lending products and services.
This growth is being driven by a few key factors:
- Shifting consumer preferences - Studies show consumers increasingly want alternative flexible financing beyond traditional credit cards. McKinsey found that 60% of US consumers are now open to POS installment loans.
- Higher average order values - POS loans incentivize customers to spend more per transaction. Data shows POS financing can increase average order values by 20-30%.
- Increased conversions - Offering financing can persuade hesitant customers to complete purchases. Worldpay recorded a 10% increase in conversions for merchants using POS financing.
Key Data Points on POS Financing's Impact
- 76% of consumers are more likely to make a big-ticket purchase when POS financing is available (Citizens Bank)
- Integrating POS financing can increase ecommerce conversion rates by 21% (Zip)
- Customers spend 15-25% more when POS financing is an option (Sezzle)
- 62% of millennials express interest in using POS financing (Credit Karma)
Implementing a POS Financing Program
For SMBs, the ideal approach is often partnering with a POS financing provider like Affirm, Afterpay, or Klarna. Benefits include:
- Fast setup - Frictionless integration with existing POS systems.
- No risk - Providers carry risk for non-payment. SMBs get paid upfront.
- Flexible options - Providers offer various installment plan types.
- Seamless customer experience - Transparent loan terms and online account management.
To maximize the impact, SMBs should:
- Promote financing options prominently in-store, online, and via marketing channels
- Train staff to proactively inform customers about financing
- Offer tailored incentives for financed purchases
- Track performance metrics to identify opportunities
Implementing POS financing requires an initial investment of time and effort. But the data shows the sales, revenue growth, and customer acquisition benefits can be substantial, especially for SMBs with higher priced products or services. As consumer financing preferences continue to shift, adopting POS loans can be a smart data-driven strategy.