BRIDGING THE FINANCING GAP:

Offering More Payment Options To Boost Retail Sales And Customer Loyalty

When making major life purchases, like houses or cars, consumers usually have access to financing. But what happens when consumers seek flexible financing options for other high-ticket items?

Are retailers prepared to help more customers boost their

purchasing power, or will they sacrifice sales to competitors

who do provide additional ways for consumers to unlock

their buying potential?

While many businesses do offer financing to a segment of

their customer base, few actively promote it, evidenced by

the fact that financed purchases account for just a fraction

of total sales today.

The reason? Some retailers may not realize that more

customers could qualify for financing, while others don’t

know how to open up financing across all their sales

channels. Recent research shows that offering financing to

a broad demographic of consumers can do more than just

close more sales. By closing the “financing gap,” retailers

can also significantly boost consumer loyalty, resulting in

repeat business and reduced customer retention costs.

EMPOWERING PURCHASES Across high-ticket retail sectors—furniture, electronics, appliances, home improvements, car parts, specialty goods, and jewelry—only

11%, within those categories, are currently financed, according to First Annapolis Consulting research commissioned by Vyze.1

Many of these sales come via a retailer’s store card or other primary financing program. But per First Annapolis Consulting’s analysis,

these programs turn down over half of applicants hoping to purchase big-ticket items, like computers, furniture and refrigerators.2

Retailers who offer financing to a limited segment of their customers could be losing sales at an alarming rate, and they could even

be losing customers permanently. In fact, 33% of customers who were denied financing by ecommerce merchants and retailers

abandoned their purchase completely, while another 35% of customers either scaled back or delayed their purchase.3

33% OF CUSTOMERS WHO WERE DENIED FINANCING BY ECOMMERCE

MERCHANTS AND RETAILERS

ABANDONED THEIR PURCHASE

COMPLETELY

ONLY 11% OF THE $1.7 TRILLION IN TOTAL SALES VOLUME , WITHIN THE PREVIOUSLY LISTED CATEGORIES, ARE CURRENTLY FINANCED,

ACCORDING TO FIRST ANNAPOLIS CONSULTING

RESEARCH COMMISSIONED BY VYZE.1

STRENGTHENING CUSTOMER LOYALTY

Over the past 10 years, consumers’ buying behavior and habits have evolved, becoming much more fluid and spanning across

multiple touch points and devices. Today’s consumers seek choice and control when making purchases — not just in what they

buy but also in how they pay.

A 2015 survey of more than 2,000 consumers showed that 42% would be more likely to shop at a retailer that offers financing

options for greater purchasing power beyond major credit cards.4

42% WOULD BE MORE LIKELY TO SHOP AT A

RETAILER THAT OFFERS

FINANCING OPTIONS FOR

GREATER PURCHASING

POWER BEYOND MAJOR

CREDIT CARDS.4

Furthermore, despite Millennials’ (those 18-to-34-years old) reluctance to take out a major credit card,5 over half (55%) of

Millennials noted that they’d be more likely to shop at a retailer that offers financing options.6 Older consumers—42% of those age

35 to 54, and 30% of those age 55 and older — agreed with this statement, suggesting that retailers should focus more of their

marketing and communication efforts toward Millennials while still encouraging customers of all age groups to participate.

When retailers do offer their customers a variety of financing options, they are likely to demonstrate increased loyalty. Nearly two-

thirds of past users of store financing come back and finance at least one additional purchase of $500 or more, and 33% do so

three to five times.7

As most retailers know, loyal customers are valuable: it can be at least five times more costly to acquire a new customer than to

retain an existing one. Raising customer retention rates can increase profits by 25% to 95%.8

STRENGTHENING CUSTOMER LOYALTY (CONTINUED)

NEARLY TWO-THIRDS OF PAST USERS OF STORE

FINANCING COME BACK

AND FINANCE AT LEAST ONE

ADDITIONAL PURCHASE OF

$500 OR MORE

IMPROVING THE CHECKOUT PROCESS

LESS THAN 1 IN 4 CONSUMERS POOLED SAID THEY WERE EVER

OFFERED A FINANCING OPTION

BY THEIR RETAILER

To reap these benefits, retailers need to not only broaden who qualifies

for financing options, but also reduce friction in the application and purchase processes.

When consumers search for financing, 44% consider a simple online application to

be an important part of the financing process,9 particularly Millennials, more than two-

thirds (67%) of whom confirmed the ability to apply for financing online would be “very

important” or “somewhat important” to them.10 Convenience is also essential, with 33%

of consumers applying for financing on the same day they want to make a large ticket

purchase.11

It goes without saying that customers won’t apply unless they know what payment

options are available.

Unfortunately, nearly one half (49%) of consumers polled were not aware of financing

options offered by retailers.12 Even more significant, only a small portion of consumers

polled (less than 1 in 4) said they were ever offered a financing option by their retailer.13

One major reason merchants may not be proactively offering financing is because on

average, roughly half of applications for financing at point of sale are declined. As a

result, customers may lack confidence in applying for financing and store associates

may be hesitant to talk about financing if they think it will result in an uncomfortable or

negative experience for the customer.14 In fact, 28% of consumers said the reason they

didn’t apply for financing at checkout is because they were afraid they would get denied.15

Well-advertised financing options available online or in-store to more consumers could

give them the confidence to apply and overcome these hesitancies.

$

OBSTACLES TO OVERCOME

Providing financing options to every customer, no

matter where they fall in the credit spectrum, presents a

considerable challenge to most retailers.

Assembling—and retaining—suitable lenders is one half of

the problem. In the past, merchants may have encountered

problems maintaining relationships with their primary or

secondary lenders, as they change their thresholds and

financing capacity, or modify their underwriting terms.

Retailers may also lose lenders because of acquisition or

exiting the business.

Technological implementation is the other half of the

problem—one that many retailers don’t have the resources

to solve. Customers do not want financing applications

restricted to a single channel; rather, they crave consistent

access across all sales channels and touch points. In a

highly regulated environment, retailers can find themselves

entangled in cumbersome processes.

Aside from technological implementation and execution,

73% of merchants surveyed also confirmed difficulty in

training sales associates to manage financing offerings.16

To arrange lending partnerships and ensure technological

efficiency, even the largest and most sophisticated

organizations could greatly benefit from the support of an

outside partner.

73% OF MERCHANTS SURVEYED

ALSO CONFIRMED DIFFICULTY IN

TRAINING SALES ASSOCIATES TO

MANAGE FINANCING OFFERINGS.16

LENDING

To close the financing gap for their customers, businesses need to offer various lending options. As individual lenders traditionally focus narrowly on certain customer segments, it’s necessary for merchants to connect with an array of trusted providers.

When building a financing program, businesses should

work to connect with lenders that offer not only bank

cards, but also the following options:

• Revolving lines of credit branded to, and offered

exclusively at, a particular merchant

• Term-based loans with fixed payments

• Lease purchases with fixed-term payment plans that

offer the option to buy, return, or extend the lease.

Adding or changing lenders – without any additional

investment, regardless of when or why a lending

partnership terminates – should be simple and easy.

Moreover, any provider should offer support in making

lender arrangements and keeping track of changes in

lender terms and capacity.

TECHNOLOGY

State-of-the-art technology should enhance the operation of any financing program, not complicate it. Retailers should construct or look for a platform that offers:

• Simple lender integration, no matter how lending

capacity changes

• Omni-channel capabilities able to serve customers

wherever they shop: in-store, online or via any connected

devices

• A single application able to run a customer’s details

through a network of lenders and financing options, and

provide an instant offer for a customer to accept or reject.

This includes presenting another financing offer, if possible,

if primary lenders can’t meet customers’ needs

• Compliance with the PCI (payment card industry) data

security standard to detect fraud and protect businesses

from harmful breaches that unlawfully disclose customer

information

Ultimately, retailers aim to deliver a simple, satisfying customer

experience, whether in-store or online, so making sure the

technological capabilities align with this goal is paramount.

BUILDING NEW OPPORTUNITIES

Offering multiple lending options does not need to complicate

the sales process and integrating the right technology does not

have to come at an immense cost to businesses or their customers.

Partnering with a trusted financial technology company that can

provide lending capacity for multiple customer segments and

simple-to-use, state-of-the-art technology can ignite future sales

growth and nurture customer loyalty.

A solution that can effortlessly deliver financing to all qualified

customers establishes confidence and trust. Most importantly,

it provides the feeling of purchasing empowerment, helping

businesses and their customers unlock their full potential.

ENDNOTES1 First Annapolis Consulting, Market Sizing Support, May 20162 First Annapolis Consulting, Market Sizing Support, May 20163 Creative Research Solutions, Vyze Merchant Financing

Exploratory Study, April 20154 Study conducted December 17-22, 2015, among 2,004 US

adults, by Ipsos eNation5 Bankrate. Skowronski, Janine. More millennials say ‘no’ to credit

cards. September 8, 2014. <http://www.bankrate.com/finance/credit-cards/more-millennials-say-no-to-credit-cards-1.aspx>

6 Study conducted December 17-22, 2015, among 2,004 US adults, by Ipsos eNation

7 MMR, Consumer POS Financing Research, February 20158 Harvard Business Review. Gallo, Amy. The Value of Keeping the

Right Customers. October 29, 2014. <https://hbr.org/2014/10/the-value-of-keeping-the-right-customers/>

9 Study conducted December 17-22, 2015, among 2,004 US adults, by Ipsos eNation

10 Study conducted December 17-22, 2015, among 2,004 US adults, by Ipsos eNation

11 MMR, Consumer POS Financing Research, February 201512 Study conducted December 17-22, 2015, among 2,004 US

adults, by Ipsos eNation13 MMR, Consumer POS Financing Research, February 201514 MMR, Consumer POS Financing Research, February 201515 MMR, Consumer POS Financing Research, February 201516 Creative Research Solutions, Vyze Merchant Financing

Exploratory Study, April 2015

VYZE.COM • 888.988.0603

Vyze is a leading financial technology company for brands. By combining full spectrum lending supply, technology, and support under one roof, Vyze is able to deliver brands simpler, more satisfying financing experiences for their customers, wherever and whenever they shop.