Millennials and Gen Z shoppers are rapidly taking over as the primary spenders in the economy. Unfortunately, these groups are much more reluctant to make impulsive purchases or stretch themselves thin financially. Additionally, credit card applications are down—especially those who have been previously denied.
All these variables add up to a major consumer group that’s wary of making large online purchases and, in some cases, unable to even if they wanted. With high-priced items subsequently moving into the ecommerce space, there’s trouble on the horizon for shoppers unable or unwilling to make big purchases outright.
Consumer point of sale financing is the solution. As the new frontier of online payments, consumer financing, or consumer credit is the happy medium between price-minded Millennials and big-ticket online purchases.
Too many Millennials have seen what credit card debt can do to those trapped under it. Their parents (Baby Boomers) have accumulated more credit card debt than any other generation. Most Millennials and Gen Z shoppers have seen and heard the cautionary tale of credit cards.
Younger consumers who do have credit cards are still using them for big purchases, but paying them off faster and not racking up as much debt. As a result of self-imposed spending limits, bigger purchases are few and far between for these shoppers. But the demand is still there. That’s why pay-as-you-go plans, installment plans and checkout financing are all on the rise.
These payment options offer the same convenience as credit cards—get the item now and pay later—without the threat of high APR and big upfront spending costs. Millennials are much more open to spending $2,000 on a 12-month installment plan than charging it upfront and dealing with overhanging credit card debt.
The concept of consumer point of sale financing is appealing for more reasons than just avoiding a big upfront charge. It doesn’t have the stigma of credit card debt, or the compounding interest that comes with it. Borrowers know exactly how much they’ll need to pay on a checkout financing loan each month—it won’t rise or fall. Moreover, it’s a debt they can’t add to by swiping their card absent-mindedly.
In short, point of sale or checkout financing for consumer loans has become a staple of “reasonable debt.” Shoppers recognize it as debt, and understand the nature of it, but they’re more willing to take it on because they have control over it. They get to pick their terms and rate. They’re aware of their payments ahead of time. And, when the debt is closed it’s done with outright.
It’s the best of all worlds for consumers and retailers alike. Consumers get what they want upfront and agree to debt on their terms; retailers increase sales and accommodate a broader range of shoppers.
Modern consumers are smart. They’re not going to stretch themselves thin for something they don’t need. That said, they are smart enough to assume debt they can handle for something they deem worthy of it. Demand will always be there; flexible financing options need to follow.
Millennials and Gen Z shoppers may clutch their wallets tighter, but they’ll loosen the purse strings if retailers meet them halfway. Point of sale and checkout financing and credit is the smarter payment option for today’s smart, responsible consumers.