Point-of-sale financing for banks, credit unions, and financial institutions
“Fintech is eating the world,” opined Forbes contributor Alex Lazarow in mid-2019. This sentiment is true now more than ever as we head into the second half of 2020. E-commerce giants like Alibaba and Shopify are growing their offerings and proving to be a viable challenger to banks, credit unions, and financial institutions across the globe.
In November 2019, McKinsey asserted that “traditional players exploring a play in POS financing have a limited period to enter the market and grow. In 18 to 24 months, laggards either will be unable to compete, because most merchants will already have POS financing partners, or will need to pay a heavy premium to get into the market.”
So how can your financial institution thrive in this growing market? Let’s identify the three business models that financial institutions are employing today:
Build: The end-to-end solution model
Financial institutions can opt to build their own end-to-end solution for point-of-sale financing. This involves a large investment in building the product offering themselves and usually lengthens the go-to-market timeline, which could prove even more costly in such a burgeoning segment of unsecured lending.
Buy: The platform-partnership solution
Financial institutions can partner with technology platforms to enable merchant clients to drive sales by offering an end-to-end solution that could include decisioning, verification, origination, and servicing. This solution lets the partner do the heavy lifting while allowing financial institutions to focus on growing their active or prospective merchant relationships.
The marketplace model
This model enables banks to compete in a marketplace of lenders and merchants. Financial institutions can tailor their terms and conditions to remain competitive in the market while gaining easier access to the consumer with little-to-no upfront investment.
What is the right solution for my financial institution?
The growing demand for point-of-sale financing is clear and present. While the long-term trajectory of the unsecured lending product remains somewhat unknown, the same principles that have guided banks for decades apply. Tailoring your point-of-sale solution to your risk profile has never been easier with multitudes of options in-market. Mitigating the fraud that continuously impacts banks remains a challenge for those entering the point-of-sale arena.
In order to understand which type of solution is right, every bank and financial institution should start by asking the following questions:
- Is your bank or financial institution more focused on customer experience or growing the balance sheet?
- What type of investment is your bank or financial institution willing to make? Building a program in-house could cost upwards of $20 million as an up-front investment.
- When does your bank or financial institution want to go-to-market? Some builds can take longer than two years, whereas most partnerships can go-to-market in a matter of months.
Consumers demand more than just a slick interface. Financial institutions require an enterprise-grade solution that combines an orchestrated front-end with back-end intelligent decisioning tools, enabling on-the-fly fraud verification and servicing tools to provide a seamless user experience. These broader demands coupled with a need for limited up-front investment and speed-to-market make Amount Pay the enterprise solution for leading banks and financial institutions.
Amount Pay is an end-to-end, cloud-based solution that empowers financial institutions and merchants to offer customized financing options to consumers. Backed by the power of Amount 360, the omnichannel solution provides the freedom to apply from the web, mobile app, in-store, or over the phone. Leverage a powerful originations engine with quick approvals for fixed-rate loans with 12 to 72 month term lengths. Improve merchant client relationships, e-commerce user experiences, and boost sales.