The Power of Financing: An interview with Michael Marcus

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Retailers are underestimating the value of financing as part of the marketing mix. That’s the view of Michael Marcus, an expert in the field of retail financing. He believes that a lack of awareness about how technology has transformed both the administration and customer experience of financing means that retailers could be missing out on revenue and an improved brand experience.

He argues that even those retailers that have invested to offer a range of financing products will discover they are no longer at the cutting edge.

As consumers embrace the trend towards mass personalization across many products and services, Michael points out that their rising expectations will inevitably carry over into financing.

Some innovative retailers have woken up to this change. They are among the early adopters of a new platform approach that uses a single application to match customers to a market of lenders. Among the benefits they report are more customers, increased sales, stronger loyalty, and a better customer experience.

Vyze sat down with Michael to learn why he thinks now is the time for every retailer to reassess its financing strategy.

 

Vyze: Financing seems so prevalent in retail. Where do you see such a big opportunity?

Michael: It’s true that some retailers have made financing central to their business model. Those specializing in big-ticket items, such as furniture or large appliances, are one example. Many airlines and hotel groups have built highly successful loyalty programs around co-branded credit cards.

However, the fact is that less than half of retail purchases are exposed to a credit program and only 11% of retail sales are made using financing.

 

Vyze: But you seem to suggest that even retailers that already offer financing could be doing more. How so?

Michael: A few retailers cater to a very specific profile of customer, but most attract a broad mix spanning a variety of demographics. Within that mix you’ll find the full spectrum of credit quality. Most of the major lenders are picky about who they approve, so it’s never really the case that one size fits all. Some customers will be declined; others may not be offered sufficient credit to cover the full ticket price or basket. New technology of the kind that Vyze offers provides retailers with an easy way of retaining more of those sales, driving revenue, and increasing lifetime customer value.

 

Vyze: How do you see retailers benefiting from this technology?

Michael: Until quite recently, a retailer that wanted to offer more than one credit product had to cobble together its own turndown program. Setting it up was complicated and expensive. Customers would first have to be declined by the primary lender before the next option could be offered. That would typically mean a fresh application, which could also be declined. It risks a terrible customer experience. Now that retail financing is available as a platform play, a single customer application invisibly waterfalls through a series of products until the right match for his or her credit needs are met. This allows the customer to quickly and easily find a financing solution that works for them; while for the retailer there is minimal IT work required to make this possible. This is very different from what’s happened in the past.

 

Vyze: Does offering a wider range of financing products bring administrative complications?

Michael: The beauty of the platform is that it removes so much of that burden from retailers. The world of lending has become increasingly complex due to regulations and compliance. Offering a multitude of products could be a nightmare of technology integrations. However, with the Vyze platform it’s all taken care of automatically. Lenders like the dynamic disclosures and the clean audit trail. Being able to offer full spectrum of lending products within a single platform is unique, and it’s much more cost effective than any system a retailer could build for themselves.

 

Vyze: What does it mean in practice to implement a financing platform?

Michael: The retailer first determines which financing products are right for their business. Ranges of options, including credit, loan, and lease products, are added to a hosted financing portal. The portal is accessed through any device that runs an internet browser. It can also be integrated with existing POS systems and e-commerce platforms. Training for associates is no more complex than learning a new app.

 

Vyze: Is there a risk that retailers could be seen as associating their brand with sub-prime financing options?

Michael: I think this goes back to the issue of the one size fits all model. If you work with a single lender, they will not be appropriate for all your customers. If you can’t offer financing, the chances are they’ll go elsewhere. There’s no reason why a retailer shouldn’t be able to explore a wider range of financing options to be able to retain that customer. The important thing is that the retailer controls which products are available. I know that Vyze has been careful to vet all its lending partners to ensure they are ethical, but the retailer has the final say on which ones it wants to be made available.

 

Vyze: One final question. How does a financing platform improve customer experience?

Michael: We’ve talked about matching the customer to the most appropriate product. What’s great about the platform is that this is all done through a single application that the customer controls. It’s quick, easy, and modern. What I think is really interesting is how this simplicity and flexibility opens a world of opportunity for customer loyalty.

Credit is a great anchor for loyalty programs; hotel chains, airlines, and now mobile device purchases offer credit programs with added benefits that are very attractive to consumers. They also give retailers more opportunities to communicate, cross-sell and upsell. The platform approach will enable greater creativity among retailers and gives more scope for extending programs to a wider range of customers. It’s great for continuity marketing.

About Michael Marcus (Vyze Advisor & Former CMO of HSBC)

Few have greater experience of consumer credit than Michael Marcus. As the past CMO and CRO of HSBC/ Household's domestic credit card business, he has led marketing, risk management, analytics, customer information management, and strategy. He has negotiated numerous credit card issuing partnerships and lead the purchase by HSBC of other issuers/portfolios. He is a former Partner at Boston Consulting Group in its Financial Institutions practice. Today, Michael leads Marcus Partners, LLC where he advises businesses on payments and lending opportunities. He also sits on the Board/Advisory Board of a number of FinTech, RegTech and alternative data companies.