For merchants in most sectors, offering point-of-sale finance is an excellent way of getting on the front foot against competitors. Yet, for those looking to really establish the upper hand, your work doesn't end by simply signing the contract with a lender, or integrating with their platform.
The key to increasing conversion is ensuring that both uptake of retail finance is high, and that those who choose to go down this road are approved. It may strike you that the latter is not within your control, and ultimately at the discretion of the lender. However, this is wide of the mark, and there are a number of steps that you as a retailer can take to ensure approval rates exceed expectation.
Engage more customers with your finance offering
The earlier in the customer journey you start advertising or talking about finance, the more customers will use it. Everywhere you put a price for your product, highlight to the customer “Or pay X payments of £X”. By engaging more customers with finance, you’ll find that more high credit quality customers take up the offer, not just the customers who need the finance to be able to afford the purchase. Hence, naturally, your acceptance rate will increase.
Take the stigma off borrowing
Retail finance is not the preserve of desperate or reckless spenders. It is not targeted at people on unfeasibly-tight budgets, or those in financial trouble. It is an entirely sensible, consumer-friendly way of paying for goods and services - particularly in the case of high-value items, or if an unexpected cost arises (such as replacing a broken appliance). As such, the way you frame your finance product(s), and even related content on your website, will be crucial to ensuring that customers understand the merits, and ultimately feel vindicated in their decision to choose point-of-sale finance.
Let customers pay more upfront
There is a wide range of research which correlates higher initial deposit options with better conversion. The reasons why are two-fold: firstly, demonstrating that you are willing to pay more upfront is indicative of greater affordability. And secondly, the option to do so will result in the loan repayments becoming more affordable too.
Use interest-free credit as well as interest-bearing
The cost of the credit (i.e. APR) is one of the guiding lights that a customer uses when considering their options. Lowering your interest rates to zero will clearly be attractive to a lot of people. But it follows that, in particular, it will be customers with good credit scores whose attention will be piqued, as this type of individual is generally better disposed to surveying their options and finding the best deal. These are the kinds of people you want to be getting into your sales funnel.
Add flexibility to your finance
How much choice do customers have when it comes to loan terms? Can they extend the period over which they pay it off, so as to make repayments more affordable? Do they have the option to make overpayments or early settlements at any time, and without incurring fees? These arrangements will need to be determined with your lender(s) too but are important boxes to tick.
These five tips are further underpinned by two important factors; both of which are within your power and should be a high priority. The first is that your customers must be well informed of the sort of finance you offer, the nature of the loan terms and rates, how their creditworthiness will be assessed, any extra fees, and all other relevant information in order to make an educated decision before applying.
The other supporting element is that the application process should be slick, simple and streamlined. There is no need for it to take any longer than a couple of minutes to apply, and all forms should be optimised for mobile, and make for a convenient UX. If there is platform integration involved with the setting up of your retail finance facility, then invest as much resource as possible, and work closely with your partner(s) to make sure these bases are covered.
So, while it may seem as though you (and your customers) are at the mercy of lenders when it comes to approval rates, the truth is there is much you can do to effect significant gains, and usually without a great deal of effort or cost either. Once you're happy that you have all the points above in hand, you'll be well on your way to boosting conversion to levels you didn't think possible.
Are you considering offering retail finance or switching provider? If so, find out more here.