Retail stimulus: POS offerings that reconfigure consumer purchasing

As a business owner or executive of a retailer, product manufacturer or service provider, you are likely well versed in the many stimulus programs the government has enacted to help businesses and consumers during the economic fallout caused by the pandemic. While these programs, such as the Paycheck Protection Program and COVID-19 stimulus checks have been effective so far, they are starting to wear out and it may be some time before there's additional action.

But what if you didn't have to wait and could unlock a different, targeted stimulus program of sorts for your business, in a way that attracts new customers and is more fiscally responsible for consumers? Modern point-of-sale programs that embed financing are essentially a stimulus program targeted to a merchant's consumers and can help reach segments of the U.S. population who need it the most to upgrade their lives.

First, let's explain the backdrop that is creating this emerging phenomenon. This pandemic has accelerated several trends causing merchants to re-imagine their shopping journeys:

• E-commerce adoption has increased substantially, rising to 16% of all retail sales in 2Q 2020, up from 11.8% in Q1 2020 and 10.8% in Q2 2019.
• Consumers are getting even more frugal with their spending as their priorities have changed. Personal savings rate rose to 33% in April 2020, up from 20% in.
• Consumers are finding renewed interest in "invest in me" purchases, i.e., for connectivity and enjoyment (e.g., electronics, sporting goods), health (e.g., fitness) and improving their surroundings (e.g., home goods & home improvement). While these tend to be big ticket items or higher priced purchases, they create substantial return on investment back to the customer.

Burned with credit card late fees and interest bills racking up, consumers are gravitating away from using credit cards for large purchases. Furthermore, with the pandemic, more consumers are on-edge wondering whether they will have a steady paycheck. In fact, Citizens' research shows that 76% of consumers are more likely to make a purchase with a payment plan, but do not want to open a credit card to make that purchase. This shows consumers are moving to a new option that is more financially responsible and convenient, where they don't have to figure out how to pay off a large sum on a credit card bill at once and therefore, more likely avoid falling into debt. Today's consumers are demanding a modern, instant, and seamless way to pay for purchases over time with easily digestible payment plans.

Taking off the training wheels

Some retailers have turned to the typical "Buy Now, Pay Later" solutions that have proliferated the market. This model gets it right in the way consumers want to spread out purchases in simple monthly payments and they don't want to use a credit card with hidden fees. However, these solutions fail in the sense that they are not designed to be integrated into a retailer's shopping experience, do not facilitate repeat behavior for loyal customers, and tend to be for relatively small purchases. Most of the BNPL models also aren't exclusive to the merchant and therefore do not maximize spending power. Think about it: spreading out payments for a $50 pair of jeans into four, equal monthly payments might be attractive to some customers, but it doesn't provide any meaningful support to the customers' financial health and increase their brand loyalty to a retailer.

Meanwhile, other retailers are finding a massive upgrade to that model — a modern solution that powers the retailer to advance their sales, the types of products sold, their margins, and most importantly, convert their casual shoppers into loyal customers and repeat business. Envision merchants handing a $5,000 check to customers browsing their website to help them get access to high-quality home office equipment or a fitness machine to improve their working conditions and health. It costs the consumer $125/month with no interest, no fees or "gotchas." These retailers took the training wheels off their standard check-out options and fundamentally changed how their customers can afford their goods.

Redefining shopping and how products are sold

The way customers purchase goods and big-ticket items is changing forever. Retailers will be left in the dust if they don't act fast and leverage Point-of-Sale solutions that can propel their businesses to a more successful future in today's rapidly evolving environment. This unique model includes:

• Payment options integrated into core shopping experiences: This is no longer just a payment option at check-out, but rather a re-definition of the shopping journey as a whole and the way products are sold.
• Customers' access to a line of credit, to be used exclusively at the merchant: This allows customers to understand how they can make those purchases in a financially responsible way, while maximizing what they can afford at the merchant.
• Personalized marketing: This allows the retailer's consumers to understand what they can afford before and while they shop, not just when they are ready to check out. It also supports and provides targeted promotions based on where the merchant wants to see a specific increase (e.g. particular products or encouraging certain types of customer behaviors).
• Advanced analytics that enable providing credit to far more customers across the credit spectrum and at times, even to those who do not have a credit score: Not only does this deliver higher approval rates and sales for retailers, but also allows them to reach new customer segments that would normally not qualify for credit and buy their products.

The solutions above are not a 'BNPL' fad, but a fundamental new way to grow a business for retailers, and I believe this is truly the future of consumer purchases. Progressive retailers, product manufacturers and service providers have an opportunity to get ahead and adopt this type of program to not only upgrade their business, but also provide a solution that is more financially responsible for consumers.