What’s the Real Cost of Not Offering Financing?

Benchmarks & Metrics | 5 mins

Maybe you think you don’t need to offer financing. That may be the case—it’s not right for every business or brand. However, if financing is a fit for even a fraction of your customers, it’s hard to ignore the positive impact it can have on your bottom line. The opportunity cost of not offering financing is high, and for good reason.

Financing has been steadily rising in popularity among customers and retailers as credit cards and private label credit cards become less attractive. Many consumers are trying to avoid revolving debt that these payment methods can enable. Millennials in particular are notoriously averse to credit and debt, with one study finding that Millennials carry two fewer credit cards and private label cards on average than their Gen X counterparts. In fact, less than one third of Millennials even have a credit card.

However, while a study found that 66% of consumers feel that they have enough credit cards and prefer not to open more just to make a big purchase, they also found that 76% of U.S. consumers are more likely to make a retail purchase if offered a payment plan backed by a simple and seamless point of sale experience. Consumers today expect total transparency from their payment terms coupled with clear and simple ways to pay, whether they’re in-store or online—and point of sale financing is a viable alternative in an increasingly omnichannel marketplace. Retail lending fits a growing need, and if you aren’t taking advantage of it, you’re missing out on sales.

PayPal found that the average order values for retailers increased by 15% once they started to offer financing, and Bread has seen results of AOV increasing by more than 30%. Let’s dive into the beneficial boost that financing can provide for your business.

The Benefits of Offering Financing

Financing is a worthy investment for any business. Consider just some of the following high-level benefits financing can offer:

  1. You’ll Make More Sales – Financing makes purchasing your products more attainable for a larger customer base. More options and a lower up-front cost mean customers can space out paying off a purchase—adding small increments to their monthly budget, making it more obtainable. Financing can also put your product within reach for customers who don’t have access to or want to use other forms of credit.
  2. You’ll Make Larger Sales – One of the first things we see when our partners start using financing is that their Average Order Values noticeably increase. A Forrester Research study found that companies that implemented an online POS financing option experienced a 32% increase in sales. That’s because paying over time encourages customers to make bigger orders right away, instead of buying a more stripped-down option now with the hope of upgrading in the future.
  3. You Get Paid Upfront – When you work with a financing partner, you don’t have to worry about chasing down payments from your customers. You get paid in full, and the risk of customers not paying you back is transferred to whoever is financing the loan. The only cost you have to worry about is whatever has been agreed upon per-transaction with your financing provider, so your accounting stays streamlined and access to capital is readily available.
  4. You Offer a Better User Experience – A seamless, integrated, and white labeled payment solution can take friction out of the buying process by putting all the information customers need about financing in front of them at or before checkout. Make sure that your payment solution keeps customers on your site without interrupting their experience. Make it easy for them to get approved quickly at any point in their journey, and they’ll get the most satisfaction out of the experience. Bread delivers a seamless, cohesive experience that matches your brand’s, so that customers can easily make their way to checkout with financing.

How Much Do You Stand to Lose if You Don’t Offer Financing?

Without financing, you’re leaving money on the table—but just how much are we talking? If we assume that your business does $2 million in sales per year with an average order value of $2,000, we can apply that amount to some of Bread’s partners and see how much you stand to gain.

Paddleboard and outdoor sporting goods company YOLO Board saw their overall AOV increase by 17% compared to the same period a year ago after starting to offering financing with Bread. They have also attributed 34% of online sales to Bread’s financing since the partnership began.

Projected added value of financing for your business: +$340 more per order.

Auto parts retailer Wheelfire has been in high gear since starting with Bread. They have seen nearly triple the amount of financed sales compared to the same five-month period in 2017 with their previous provider. They are also seeing 29% higher AOV on financed sales compared to non-financed sales. Overall, Wheelfire is projecting a 45% increase in total sales in 2018.

Projected added value: +$580 per order, +$900,000 in overall sales.

Cabinetmakers The RTA Store saw 130% higher AOV for customers who used Bread financing compared to customers who did not use financing. They’ve also seen an 8.5% incremental increase in year-over-year sales.

Projected added value: +$600 per order, +$172,600 in overall sales.

Grill wholesalers BBQGuys.com have seen a 9.5% increase in their overall conversion rate since launching with Bread. Additionally, customers who used financing had a 32.6% higher AOV and checked out with 24% more items in their carts.

Projected added value: +$652 per order.

From these examples, we can see that adding financing with Bread could lead to an average increase of $543 per order and 26.8% in overall sales—equivalent to $536,300. That’s how much you could be leaving behind with every transaction that isn’t being financed. Financing is the future, and more of your customers are looking for financing than you might think. Don’t leave money on the table, head here to learn about adding POS financing to your ecommerce experience.