Advantages of POS Financing for Online and Offline Businesses

Advantages of POS Financing for Online and Offline Businesses

In Business Strategy, Content Marketing, Digital Marketing, Financial Advisor Marketing, Marketing Strategy by Robb FahrionLeave a Comment

Reading Time: 8 minutes

Here’s the deal. People spend money. They only stop when there’s no more left to spend, but what happens if businesses themselves give them the buying power? This is the point of POS financing, and its advantages are what we are going to explore in this article.

What Is POS Financing?

Point-of-sale (or POS) financing is the method of allowing consumers to take out instant loans at the moment of sale, hence the name. It’s not something that’s entirely new. Although it’s gaining popularity in the advent of online shopping, it is something that has been practiced for decades wherein the business owner (or third-party lender) provides a line of credit to his customers.

The initial challenges

Getting a podcast up and running is...complicated, to say the least. Beyond just the cost and technical requirements, there were a range of issues we had to address. Let’s look at some of the issues we faced:

What’s the right format? How long should each episode be? How many speakers should we have on at a time and kind of content should we focus on? We spent a lot of time thinking these points through individually, but it just didn’t click. 

Then, we thought about working backwards: we set key overall goals: to boost traffic and to generate conversions. Then, we went back to those questions and things became clearer. 

The lesson here is simple: you need to have a clear understanding of your “why,” a mission statement of sorts for your podcast. This’ll function as a frame of reference both for technical questions and issues of style and approach way. 

There’s one more question you need to answer: “What’s in it for them?” What incentivizes your audience to listen to and engage with your podcast? What tangible value are you offering? 

Cost and effort

Those first few episodes can be tough in terms of cost and effort: You’ll need to get the right technical infrastructure in place, find qualified speakers, and market your podcast: there are so many factors to consider. 

Define a clear SOP and follow through on it. Make sure everyone on the team is onboard with the idea of a podcast and that they’re putting in the right effort. And have a can-do, learning attitude: These are the things we focused on. Those first steps are the hardest, but once you have a clear process in place, it all comes together.

Why Is It Beneficial for Business Owners to Offer POS Financing?

It is easy to see why POS financing is so popular, especially for those that collaborate with third-party lenders. It’s a triple-win situation. The business owner wouldn’t have to invest that much to provide the service yet he will still get to reap the benefits, the third-party lender would get a steady stream of leads without much need of marketing, and finally, the customer’s quality of life increases through better access to products and services.

For the purposes of this article, however, we are going to focus on the benefits of POS to business owners.

Drive Sales

It’s no secret that consumer POS financing drives sales. These buy now pay later schemes give customers a chance to enjoy products and services even without paying upfront. In fact, according to recent statistics, it was found that online merchants using Paypal and Bill Me Later experienced a 32% increase in sales. This was true for sales done in either browser or mobile. 

We weren’t able to find recent statistics that show the effect of POS financing on offline sales, but it is not too farfetched to assume that the results would be pretty much the same. At least in our own experience and the other business owners that we have interviewed.

Increase Order Value

One’s total sales are not the only unit that POS financing influences. It can also increase order value. Order value is the average amount that you earn per sale transaction. 

That’s because as you empower the consumer’s buying power, it is only natural that he will seek to purchase more and make the most within a single transaction, especially if the terms of your POS will restrict him to make another purchase unless the previous one was fully paid (as is the case for a lot of offline merchants offering this service).

In fact, in the same statistics we have referenced earlier, they have found that there was a 75% increase in the average order value of companies that allow POS financing.

It Is Another Great Chance to Attract Customers

There are two ways how POS financing encourages customer loyalty and even attract new ones:

  1. It improves your company’s reputation. One of the frequently-overlooked benefits of offering POS financing is its influence on company reputation. Customers view brands that offer this mode of payment as more understanding or compassionate compared to other brands that don’t. They consider this a move that understands the plight of the average consumer. It generates goodwill and motivates customers to remain loyal to the company. It can even encourage them to overlook negative experiences. 
  2. It expands your customer reach. Aside from improving your brand reputation, offering POS financing also allows you to extend your demographic reach. For instance, if your usual target is members of the upper class due to the cost of your goods and services, then offering POS financing may allow middle-class customers to enjoy your offers as well. It can also present an opportunity for people who don’t usually qualify for personal loans or those who simply don’t have the time to process loan applications.

Improve Cash Flow

Most of the points that we have mentioned above pertain to the benefits of POS financing in general. Here’s a benefit that is unique to business owners who collaborate with third-party lenders, though. 

Offering POS financing in-house can be quite costly, not just because of the investment it requires but the effort collection requires. Unpaid debt can also be an issue and can quickly turn the advantages of POS financing into disadvantages. 

Working with third-party lenders, however, spares businesses from such risks. First of all, partnership with third-party-lenders doesn’t cost a lot if at all. There are institutions out there that are more than willing to partner up with businesses. After all, as mentioned above, working with merchants provides them an opportunity to get new clients with minimal effort. 

They would also handle the costs required to pay for the goods and services due, allowing you to receive payment upfront.

Later on, they will also shoulder the costs required for collection and of course, whether through the repercussions of slow payment and unpaid accounts. It’s part of the nature of a lending business, after all.

All of these factors then contribute to an improved and uninterrupted cash flow to the business owner.

Business Owners Will Be Doing the Average Consumer a Service

Finally, as more merchants both online and offline offer this payment system while collaborating with lending companies, they will also increase its demand and encourage competition in the process.

This will then motivate lenders to provide lower interest rates and more flexible payment terms that can ultimately service the average consumer. 

It can even improve the consumer’s financial state, increase his buying power, and return to do business with you, creating a healthy cycle where everyone is happy.

To Sum Up

Point of sale financing allows consumers to pay for their purchased goods and services with a loan. The cost may be handled by the merchant himself, or a third-party-lender. 

POS financing benefits all the parties involved, but more so the business owner, giving him increased sales, average order value, brand reputation, and cash flow. It will also encourage lenders to be more competitive and offer lower interest rates and more flexible payment terms.


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Robb Fahrion
Robb Fahrion, Partner
Flying V Group