CXFS 2021


Point of Sale Payment Plans Are Taking Off -- Citizens Bank Is Ready

brought to you by WBR Insights

When it comes to purchasing big ticket items, people are always open to new ways to offset the payments. Few have the means to shell out hundreds or possibly thousands on a piece of furniture or other such product, and so often turn to credit cards and other forms of borrowing.

However, these methods often come with high-interest fees and other costs, which leaves customers hungry for alternative ways of accessing the finance necessary for these items. Into this vacuum steps the point of sale payment plan - a simple and convenient way for people to access finance in the same location they are making the purchase.

Point of Sale Payment Plans

The ability to arrange payment plans at the point of sale is not a new concept, but it is one which has grown in popularity in recent years. They can often be arranged quickly and effortlessly, and regularly come with 0% interest - either for the entire term or for a limited period.

Demand for these kinds of financial products is being driven mostly by millennial consumers. These young people have grown up in the aftermath of the global financial crisis and have come through those times with a distrust of mainstream financial organizations. This is why millennials have, on average, about a third less credit card debt compared to their Baby Boomer or Gen X equivalents. They have seen the damage that irresponsible lending and borrowing can reap and are reluctant to put their faith in the system.

However, this demographic still wants to be able to access big ticket items, and so are open to new ways of financing these purchases without relying on traditional credit streams - as long as the finance is over a fixed term and only for specific purchases.

"Some traditional banks have piled into the point-of-sale market," writes The Economist. "In 2015 Citizens Financial Group, a regional bank, began providing installment loans to customers upgrading their iPhones at Apple stores. Its portfolio of such merchant-financing loans grew from $700m to $1.2bn over the past year. Millennials toting iPhones are not the only ones borrowing more. In the first quarter of 2018, personal-loan balances in America surged by 18% year-on-year to $120bn, according to TransUnion, a credit-scoring firm (see chart). Credit-card debt, meanwhile, rose by just 6%."

Customer Experience

Citizens Bank is very interested in the point of sale payment plan market and has commissioned its own research into the product - with a specific focus on customer experience.

What it discovered was that customer experience at the point of sale was a key factor in deciding whether the customer would complete the purchase. According to the research, 76% of customers were more likely to complete the purchase if the point of sale payment plan was simple and seamless to arrange.

"According to the survey, 62% of consumers would prefer fixed monthly plans with clear payment terms," reports Citizens Bank. "Trust in the institution offering the financing, along with a clear understanding of how the amount will be paid off, were seen as the most important factors for consumers considering a large purchase. Further, 66% of consumers feel that they have enough credit cards and prefer not to open more just to make a big purchase. This points to consumers wanting an alternative to opening up a new credit card to make a large ticket purchase at a retailer."

As already discussed, millennial customers are less likely to have credit cards and are therefore even more open to these revenue streams.

Final Thoughts

Point of sale payment plans are likely to grow in popularity in the years to come. However, it's clear from Citizen Bank's research that customer experience plays a big role in deciding whether a person will take up the offer and complete the purchase or not. This means brands must endeavor to make the process as seamless and stress-free as possible to give themselves the best chance of completing the sale.

"The bottom line is that consumers want a simple and easy experience when they make a large purchase, and we believe that this research shows that retail brands can modernize their payment model by moving away from the co-brand/store credit approach of the past," said Executive Vice President and Head of Unsecured Lending and Cards at Citizens Bank, Andrew Rostami. "We've seen this first-hand as the financing partner for well-known technology brands and believe there is tremendous opportunity in this space."

You can hear Citizen Bank's Senior Vice President and Director of Customer Experience, Natalie Higgins, speak at CXFS 2019, taking place in July at the Westin Copley Place, Boston MA.

Download the agenda today for more information and insights.

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