How Fintech Platforms will Redefine the Customer Experience

Shopping

Today’s retailers all have at least one objective in common: optimize the customer experience. In the age of innovation, with technology like AI, predictive analysis, and personalization, retailers are quick to adopt the latest and greatest solutions with the goal of providing the best shopping experiences to their customers.

The problem lies in that no matter how much 21st century technology is incorporated into the shopping experience, if a customer can’t afford to pay, these investments can be a waste.

Retailers have long understood the role of credit in winning sales and increasing ticket sizes. However, many might not see the direct effect this has on the customer experience. Currently 47% of customers that apply for store credit are declined, and as a result 68% abandon their purchase. This not only has an effect on sales, but also on brand reputation and loyalty.

Who are the people being declined? Contrary to popular belief, they are not insolvent or negligent. They are often young college graduates, Millennials or others such as recent transplants to the US with thin credit files. In fact, research shows that 61% of them have incomes of at least $50,000 a year. They are people who are ready to buy, but can’t because they have limited choices for financing today.

For retailers looking to up their customer experience, their first step isn’t to invest in novelty technology, but instead to look to new financial technology to reevaluate their current credit program, and make more payment options available to more of their customers.

Innovation in Retail Fin-Tech

Innovation that can impact both the ability to extend credit to more customers and deliver it in a consistent way is on the rise within the retail consumer financing market.

New entrants are offering credit to those with lower FICO scores, addressing the void left by traditional banks, and providing retailers with an opportunity to offer credit to a wider range of customers. However, simply adding lenders still leaves a major problem unaddressed: the customer experience. The inherit challenges of working with multiple lending providers, has prevented many retailers from taking advantage of the potential opportunity.

Before today, retailers looking to expand their credit programs to more customers had to manage integrations internally. This is a path few retailers have wanted to venture down.

With the emergence of financial technology, retailers now have the ability to empower their customers with simple, yet robust solutions that can drive sales. Technology uncuffs retailers so they can dynamically deliver real-time credit offers to customers.

The Value of a Platform

Multi-lender technology platforms have reduced the barriers to entry and are retailers best route to ensuring that every customer receives a seamless and standardized experience, regardless of their credit background.

Platforms have empowered the retailer and the retailer’s customer in several key ways:

  1. The Cost of Implementation: Any kind of point of sale system or eCommerce shopping cart upgrade generally requires a significant level of adaptation to support a multi-lender model. In the past, adding a new lender meant a large budget. Through a platform like Vyze, it’s a single implementation process. Minor updates may be periodically required, but the headache of having to integrate new features over and over again is absolved.
  1. The Application Process: Traditionally, if a shopper applied for credit and there was no credit offer from the primary lender, they either had to find another form of payment or fill out an entirely separate application. As you can imagine, this is a less than optimal customer experience, leaving the customer at risk of being declined twice. With a single platform, the customer is able to apply once and get approved for the best credit offer available. That means no delay, extra effort, or risk of an abandoned sale not only for the customer applying for credit, but also for other customers waiting at an in-store checkout.
  1. Flexibility in Lending Supply – A lender that worked for you and your customers in the past might not be the best fit in the next 5 years. Should one of them tighten lending criteria or exit the market, retailers in the past had to scramble to find an alternative. Through a multi-lender platform, retailers have the flexibility to adjust lending supply so that the customer experience is never negatively impacted. 
  1. A True Omni-channel Solution: When today’s consumers search for financing, 44% considers a simple online application to be an important part of the process. Convenience is also essential, with 33% of consumersapplying for financing on the same day they want to make a big-ticket purchase. Platforms have the ability to make financing available in-store or online, when customers need it most.

Retail Adoption

As the retail industry becomes more aware of the benefits and accessibility of expanding credit, a few market dynamics are to be expected. The largest retailers that haven’t innovated will seek to meet or exceed the competitive position of their rivals. Mid-size and small retailers will find they have an agility advantage over large rivals as they can more rapidly leverage new financing and technology solutions.

What is clear is that consumer financing is only likely to become more important and prevalent in an increasingly competitive and sophisticated retail market in years to come.

*This piece was contributed by Vyze to include in PYMNTS.com’s What’s Next and Payments and Commerce eBook.* 

About Jai Holtz (VP of Strategic Retail Services at Vyze)