Millennials are more afraid of credit card debt than they are of death.

Out of 500 Americans that were polled, 33% admitted that credit card debt is the scariest aspect of their life compared to the 20% who said the same about dying, according to Creditable. In light of this, fintech has come to the rescue by offering POS lending solutions. In the past year, 9 POS lenders have raised over $700M and are becoming an increasingly lucrative asset to online merchants. But, how does POS lending cater to millennials grim view of credit card debt and perhaps more importantly, how will POS lending companies overcome the retail and customer experience challenges they are undergoing?

Getting Plastics Out of the Oceans and Our Wallets

One reason why millennials are deathly afraid of debt is because they witnessed the devastation of the 2008 global financial crisis. Additionally, this generation also carries more student loan burdens than the generations before them; From 1990-2015, the cost of tuition for a bachelor's degree increased by 164%. Lastly, millennials also witnessed their family and friends incur debt, and as a combination of these experiences in their life, they demand a different way of lending and living. This has caused a disruption to an industry that has been around for almost 70 years.

As millennials demand alternatives to antiquated systems and spark innovation across all industries, they have ignited a new trend in fintech and startups are all over it: Point of sale lending. Unlike regular POS services where you use a debit or credit card for payment, POS lending empowers consumers to take out an instant, small personal loan to pay at checkout.

Advantages of POS Lending

From a consumer perspective, POS lending offers a transparent and fixed payment loan which makes them a simpler alternative to credit cards. Since loan repayment options are given in either 3, 6, or 12-month plans, consumers can choose the most affordable payment option that fits within their budget. For example, I went to, a certified online retailer for Mac electronics and checked out how their POS lending works:

After selecting an item, the retailer let me know that it was available for financing and immediately provided a quick and simple overview of payments and interest rates. Quick, easy, and transparent--everything consumers want.

Merchants are also benefiting from this new form of fintech since it gives consumers more purchasing options and power. This works to boost sales, increase conversion rates, and supply smooth cash flows. Since POS loans are quicker than normal loans and credit card applications, this also helps merchants sell more products and services. POS lending companies can have a seamless integration with online retailers and are slowly becoming apart of brick and mortar shops as well. This form of payment is becoming a way for brands to demonstrate their ability to adjust and accommodate the evolving demands of consumers. Brands like Expedia, Nest, Steve Madden, and Urban Outfitters, amongst others, have integrated a POS lending option and enhanced their customers' purchasing experience.

Loan Rangers

Since June 2017, over $700M has been raised between all POS lending startups with a few companies who are leading the way to the top of cash mountain.

Affirm, a startup based out of San Francisco has funded over one million loans to consumers. They work with some retail giants like Nest, Swatch, Orbitz, and Hoover with the goal of making financial services more honest and inclusive. Recently, they launched a pilot program to provide a new budget and booking experience for hotels, airlines, and other online travel agencies. But, there is thunder from down under.

Afterpay is an Australian fintech company with offices in the US, Australia, and New Zealand. With an emphasis in clothing retail for the whole family, they partner with some of the most leading fashion brands. Free People, Kim Kardashian West Beauty, Steve Madden, and Anthropologie have all made a fashion statement by offering Afterpay services to their customers. But, Afterpay knows that true beauty lies on the inside, so they also partnered with Primary Dental in October of this year to make healthcare more accessible.

Other POS lending companies like Bread, offer a white-labeled financing solution so businesses can engage on a deeper level with their consumers. Klarna on the other hand, offers a full menu of services like online checkout, identification services, and standalone payment methods to ensure consumers have a smooth shopping experience with any transaction.

Although some might think that big banks would see POS lending as a threat, banks like Wells Fargo, Citigroup, and Synchrony Financial have been offering this type of lending service indirectly for over 20 years. The real rivalry is between who can provide the best customer experience.

More Money, More Customer Support

As innovative as a new product or service might be, if the customer service experience is second rate, what should be enthusiastic reviews will quickly turn into very public complaints. This is especially true for tech companies who naturally experience a higher customer support volume due to their integration complexity. Since banks are not competing with these fintech startups, the true competition lies in who can provide a premier experience. However, POS lending companies face 3 key customer support challenges that they need to overcome in order to stay on top of the fintech world.

#1 Customer Support Channels

When a customer wants to make a purchase on a website with POS lending, not every retailer has chat support available, and if they do, some do not offer mobile-friendly chat support. Offering this channel is critical to both retailers and POS lenders as it increases the chance of a sale. So, who is responsible for supplying the support? If a retailer only has phone support, can they transfer the call to their 3rd party lender, or does the customer have to hang up and call another number? With all of the transaction level data gathered by retailers, this increases the need for multichannel engagement on both sides. One way for lending companies to approach this would be to implement a multi-channel strategy for customer care. As a part of the retailers channel strategy, their IVR system design should include a lending support option to create an easy path of communication for customers. By providing strategic communication channels, retailers and lenders can eliminate abandoned shopping carts while repeat customers come to love and value the retailer for their payment flexibility.

#2 Segmenting Support: Retailer Versus Lender

An issue retailers face with POS lending services is the integration of technology into their website or with a physical register. With the variety of website architectures and registers, consistent and smooth integrations can be hard to achieve. When retailers experience technical errors, they need quick and immediate technical support which can be hard to provide when POS lending startup companies have lean teams and a rapidly expanding customer base. In addition to technical support issues, POS lending companies also need to implement lender lead generation support for new retailers. As we pointed out earlier, retailers can exponentially increase their sales with lending services but few can do this without having training and support. In order for retailers to be continuously boosting sales and upselling their customers, lending services need to be their guide along the way. So, how can these issues be resolved? POS lending services should offer both direct customer and retail vendor support. Modern consumers require multi-channel, digital support and above all, quick resolutions. Retail partners on the other hand, need immediate access to highly trained IT professionals to install, integrate, and troubleshoot issues between themselves and the POS entity. Although both of these queues are essential for success, each must be approached with unique strategies and without them, sales, CX, and brand reputation suffer significantly.

#3 Personalization

Since loan repayment options are given to consumers, they can choose the most affordable payment option that fits within their budget and in turn, retailers can propose future personalized offers. Similar to how Amazon can suggest what products you might like based on past purchases, POS lending merchants can do the same but with your budget and credit in mind. However, if the data does not flow seamlessly from retailer to lender, this can negatively impact CX. So, what’s the trick to a seamless experience? Ensure that both partners have assigned resources for IT support and customer care as many of the challenges arise in the initial connectivity and website set up. However, once the integration is set up properly and data is flowing back and forth, both teams can concentrate on seamless customer care.

As POS lending shapes a new future for the credit industry and fintech, customer experience needs to stay at the forefront in order for startups to grow up from the teething stage. Did you know that brands spend 6-7 times more on obtaining new customers than they do on retaining their existing customers? When companies are growing, often times the focus is on customer acquisition while customer retention and experience becomes an oversight. Answer these 3 questions and learn how to keep acquisition, retention, and experience in balance.

When it comes to POS lending support services, we are your go-to pros. Contact us to learn how we can help you augment and transform your support experiences.

Aaron Fischer

SVP of Sales
December 19, 2018