The Importance of Exceptional Credit Experiences at Checkout

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Let’s face it, getting in-store credit today can (but doesn’t have to) be a chore. Too often customers have to take the time to fill out a lengthy credit application and wait only to find out they weren’t approved. Which then leads to that awkward You’ve been declined conversation every customer and sales associate hopes to avoid. Sometimes there’s the chance for a second credit application, but most often the customer is lost and leaves the store with one of the most negative shopping experiences one can imagine. But it doesn’t, and shouldn’t, have to be this way.

In fact, when done right retailers can turn credit into a competitive advantage. To get the scoop on how retailers are doing exactly that and turning shoppers into loyal buyers we turned to retail payments veteran Amy Hanson. Last April, after 33 years of working for Macy’s, she joined a few company boards, and engaged in advisory work for technology start ups, as well as consulting for more traditional retailing, to actively leverage her broad portfolio of retail, finance, consumer credit and technology leadership. In this brief Q&A, we reached out to ask her how credit technology platforms, like Vyze, are changing the way that retailers offer credit to customers, and how they are able to combine technology and a generous lending supply to deliver exceptional checkout experiences.

Vyze: In the highly regulated market of primary lenders, where roughly half of all credit applications are declined and only 11% of retail sales are made through financing, where do you see the opportunity to innovate financing for retailers?

Hanson: I would say the process of applying for credit in most cases is still too hard. It’s time-consuming for the customer (and the sales associate, if the process is handled in store), making there a higher probability of a negative outcome, which doesn’t help anyone. Any time a sales associate has to think “Do I want to engage in that kind of difficult conversation with my customer, which might not turn out well? And, do I want to hold up the line by engaging in a credit conversation with a customer”, that isn’t good. When there is doubt from either the customer or the sales associate on a positive outcome, or wasted time, they will be inclined to skip the application process, simply complete the sale, and not even attempt the credit discussion.

This is why I think retailers have an opportunity in the consumer credit arena – with the use of technology – to improve this experience for everyone, and benefit sales, and consumer choice. Some of this opportunity is driven by the reality that in the primary lender space, regulatory requirements have added pressure and requirements for data, disclosures, and in doing so have limited lending ability.

Retailers can seize this opportunity by using both the data available for customers, and the technology to access multiple lenders. The smart coupling of these levers can get that customer to a positive outcome, allow them to access credit at their choice, and really leverage that customer experience for future loyalty efforts.

Retailers and lenders have a lot of data on customers, so whenever possible during the application process, the process should be streamlined by asking customers to confirm data prepopulated in fields, and prequalification. Having access to multiple lenders through a universal front-end application is also important versus having a single lender as a one size fits all proposition. In today’s world, that simply doesn’t work.

I also don’t want to overlook the importance of highlighting the retailer’s payment solution’s value proposition in the process to the customer – whether it be payment plans, a loyalty program and points, free shipping, ease of returns, etc. It is critical to make it clear and simple to the customer – “what is in it for me”? And that message always has to be approached from the consumer’s perspective. If you have a clear and simple value proposition for the retailer’s payment plan, a simple and easy application process, with a strong likelihood of a positive outcome for the customer, you have a winning formula.

Vyze: With all that in mind, what should retailers keep in mind when considering financing platforms?

Hanson: For retailers, the battle for capital is tough, so any platform that can show a good return on investment is essential. It’s critical for a platform to be efficient so that it doesn’t have to be touched often, and can easily interface with multiple providers on the back end. That means minimum integration and ongoing investment. Those are all winning parts of the formula for any retailer at any company.

Additionally, when the platform does have to be touched and updated to best accommodate the retailer, it should be open and easy to adjust as lending partners and regulations inevitably change over time. You know that they will change, so being able to leverage a one-time investment that is not only agile but also doesn’t become obsolete is important. So is the ability to pull new data streams into the architecture. This could be new lenders, or a credit bureau, or some other kind of scoring, and it should be easy to adapt to new data sources as they become available. The infrastructure has got to be able to easily adapt to those new inputs just as it must adapt to new regulatory requirements.

Vyze: These finance platforms are just starting to hit the market, so I imagine that many retailers are somewhat hesitant about adopting them. What are some reservations that retailers have when it comes to considering platform technologies for financing?

Hanson: For a retailer, the first priority is to get a strong return on their payment platform investment. The second is the ability to maintain control over the retailer’s brand and customer experience. You’d want to make sure that the platform provides a positive experience at point of sale or online and that you, as a retailer, still have control of that customer relationship. That is key, and that gets beyond what we’re talking about here and into the relationship of the credit providers, but I think having that control around the experience with the customer—ensuring that the capital investment will drive a good return on investment and not require ongoing continued updates that are significant from a retail perspective—those are both key when retailers consider any kind of new technology.

Vyze: Many large retailers are starting to see the benefits of working with secondary lenders in addition to their primary lenders. In addition to sales increases and growth, these retailers are also reporting an increase in repeat sales and loyalty. How does financing support improve customer experience?

Hanson: Let’s tackle the first part first. The benefits of working with a secondary lender in addition to a primary lender are all about turning that potential customer negative into a positive and improving confidence with both the sales associate and the customer. The customer is confident about the answer, and the sales associate is confident about asking. And if you’re presenting the financing option online, you’re not going to risk —by presenting the credit option—an abandoned shopping cart as a result.

As a retailer, on the one hand, you want to be able to offer seamless credit options. But you don’t want to risk a customer walking out the door or abandoning their shopping cart, either. Once the credit relationship with the customer is established, it’s easier to shop with a retailer. It’s easier to transact. It’s easier to return items. And I, as the customer, potentially get promotional financing, or some form of payment protection, or other benefits. There’s something that the retailer is offering to the customer to improve their confidence in the relationship and enhance their desire to shop again with that retailer.

This leads to repeat sales, and I think any retailer would say that their credit customers spend anywhere from two to three times more than a third-party card customer. This is because a relationship is being built. There’s confidence and trust, and any time you have those things, you have repeat sales.

If you are not solving a problem for a customer or a retailer, then there’s no value proposition. Instead, by providing seamless and easy access to financing, you are solving a problem and building a relationship. You want to go for that “wow” in an experience. You want the customer to think “That was easy. That was simple. They added value for me. It was a great experience, and I’m going to come back.” You want to do that with every customer interaction, and credit offerings are no exception.

About Amy Hanson (Former Macy's Head of Credit)

Amy Hanson is actively involved in advisory and board roles for several companies, leveraging her broad portfolio of retail, finance, consumer credit and technology leadership at Macy's, Inc. over her 33 year career. Post her retirement from Macy's in April 2016, she joined the board of Messer, Inc., one of Cincinnati's largest privately held companies, and is active in the technology sector as an advisor.