Point of Purchase Financing
Online shopping is the prevalent method for purchasing everything including electronics, garments, furniture, kitchen products or services. As a result, many e-commerce platforms and brands offer easy financing options to attract more customers. Point of purchase financing has been a popular payment method in use for several years.
Buy Now Pay Later (BNPL) is a similar payment method typically offered for smaller purchases. KredX offers instant payment options to your business buyers at the point of purchase, which increases your overall sales.
The following sections will cover everything to know about this financing method.
What Is Point of Purchase Financing?
Point of Sale (POS) or point of purchase financing is a broad term that refers to flexible payments in instalments. Retailers and shopkeepers typically offer this payment mode for big-ticket purchases like home appliances, furniture, home renovation, etc. They usually partner with third-party lenders and integrate their financial services upon checkout.
POS financing typically comes with less stringent eligibility criteria than other financing methods. Many lenders offer 0% Annual Percentage Rate (APR) for a certain duration. Some allow customers to buy specific goods up to a certain credit limit, depending on their eligibility.
How Does Point Of Purchase Financing Work?
POS lending is offered by traditional banks, credit unions, e-commerce platforms or non-banking financial companies. Retailers partner with these institutions to offer POS financing options on their websites for certain products and services. The APR is usually 0% though some lenders may charge interest for less qualified borrowers.
Customers need to fulfil certain conditions like having sufficient income or credit scores to avail Point of purchase financing. Some merchants allow customers to apply for a one-time instalment loan upon checkout. Others require them to sign up and choose a payment plan to use this service.
Once the buyer accepts the terms and conditions, the lender approves the loan. Afterwards, he/she can interact with the lender, who will pay the retail outlet or website for any purchase. Then, he/she can repay the amount in instalments as per the loan’s terms.
Approved customers can choose a repayment tenure of 3, 6 or 12 months, depending on the lender and budget. They can repay the amount on the lender’s website or mobile app. If he/she fails to make timely payments, some POS providers can charge a penalty.
Benefits of Point Of Purchase Financing
The following are some of the benefits for businesses offering POS financing:
- Increased customer base:
Traditional financing options like credit cards and personal loans can be offered to a limited number of customers. In contrast, anyone can access a company's products/services via point of purchase financing.
- Sales growth:
One of the most important aspects of easy customer credit is the opportunity for increased sales growth. Many customers lack the funds necessary for a large lump sum payment but can repay in instalments.
- Higher order value:
Offering Point of purchase finance options benefits retails by increasing conversion levels and reducing cart abandonment rates. It also makes it easy for customers to afford big-ticket purchases. For example, a student with a tight budget can afford an expensive laptop with POS financing.
- Increased revenue without risks:
Vendors who offer this facility can increase their sales by as much as 33%. They only have to pay an upfront fee to get these benefits risk-free. The lender takes all the risks of defaults and other risks once the loan is approved.
- Positive customer experience:
POS facilities can improve a brand's image among customers as it motivates more people to make a purchase. When a firm increases its client's purchasing power, it can benefit from repeat sales.
Challenges Of Point Of Purchase Financing
There are numerous challenges to the growth of POS facilities in India. Some of these are:
- Many retailers in India are not well equipped with today’s technologies and the internet.
- Lending institutions that do not offer flexible repayment options may risk losing customers to a different provider.
- POS providers in the country cannot share data with third parties without their clients’ consent, which could lead to duplicate KYC records.
- Moreover, many point of purchase financing providers do not follow stringent KYC norms and onboarding protocols.
How to Access Point of Purchase Financing?
Most retailers partner with a financial institution to offer Point of Sale facilities. Clients of such businesses have to create an account with the lender to be able to select this option at checkout. Lenders require them to provide basic details like the company's name, address and date of incorporation and may sometimes run soft credit checks.
KredX offers instant credit to businesses at the point of purchase with its Buy Now Pay Later (BNPL) services. With it, your B2B clients, including retailers, dealers and distributors, can get immediate financing. To apply for this facility, fill out the registration form and sign the given agreement.
point of purchase financing is a convenient tool for businesses to generate more income by allowing their clients to pay in instalments. For small business owners, it can increase their credit limits and ease of transactions, which would help them grow rapidly.