As the pandemic (hopefully!) subsides, consumers are ready to spend. While much of that spending will be directly out of savings or put onto a credit card, a new purchasing model emerged over 2018 and 2019 and, now as the pandemic winds down, we are likely to see its continued ascension.
Point of Sale (POS) loans involve third-party lenders who partner with merchants to provide customers with a payment plan. Much like layaway plans of yesteryear, POS loans differ in two key regards: 1) they are not made by the retailers themselves, and 2) they are not only available on big ticket items but also on everyday things like shoes and electronics.
Here’s how it works: At checkout (both traditional and digital) customers are offered a plan that allows them to take the item home and make several months (generally not more than a year) of payments. These lenders contract with retailers to purchase the goods at a lower price than they charge the consumer at checkout, and the lenders’ margin comes from this price differential. This means that buyers are not charged interest for the loan but instead pay back to the lender the full price of the item purchased, which the lender already got a deal on.
The industry is already estimated to be roughly 3.5% of all annual consumer spending, which translates into roughly $391 billion/year. Tech startups like Affirm underwrite the bulk of the loans, partnering with retail chains across the country. In 2019, Affirm did $1 billion in POS loans, mainly concentrating on biking, travel, and clothing. By the end of the year, they’d partnered with Walmart.
And there is every reason to believe that more and more companies will begin looking to offer similar financing options. JP Morgan is already getting in on it with “My Chase Plan,” as are PayPal, Square, Bisplay, and Bread. Nowadays there are even apps like SuperMoney and GreenSky that allow users to compare different financing options against one another.
TransUnion VP Paul Siegfried believes these POS loans are mutually beneficial for consumer, retailer, and lender alike: “As brick-and-mortar retailers continue to face challenges, many merchants are implementing point-of-sale financing alternatives as a potential new avenue for growth.”
POS Loans, Consumer Data, and Onsite Inspections for Consumer Reporting
No matter the lender, no matter the loan type, consumer reporting is an essential part of finance. Companies like Affirm have built out rapid algorithms that quickly pull and evaluate a consumer’s credit history before authorizing the loan, oftentimes in matter of seconds. But this technological intervention did not eliminate consumer reporting, it merely accelerated it.
Any company wishing to pull consumer reporting, even if it is done by a machine, must comply with federal restrictions and industry best practices to protect consumer data.
This obviously includes OnSite Inspections for Consumer Reporting, which provide an unbiased, third-party assessment. Companies like TransUnion, Equifax, and Experian all require that businesses utilizing their consumer reporting data undergo these Inspections to help ensure compliance.
TrendSource is a premiere provider of OnSite Inspections, and is one of the few providers authorized for all three major credit bureaus. TrendSource’s Inspectors are reliable and efficient, helping companies document compliance, and the QA team is always on hand to ensure that reports are accurate and professional.
Whatever type of financing a company is looking to get into, OnSite Inspections for Consumer Reporting are a necessary regulatory check that TrendSource has proudly provided for over a decade.