Consumer financing is what it says it is: finance for consumers. It’s available to use at the checkout of retail businesses, both in store and online, and allows consumers to spread the payment of a good or service. Consumer financing reduces the upfront cost of a purchase, helping consumers to manage their money more effectively (when used responsibly) and afford more goods.
Types of consumer financing include:
- Credit cards
- Store cards
- Retail finance (including Buy Now, Pay Later, Pay in 30 and interest-bearing credit)
- Hire purchase
- Personal loans (secured and unsecured)
The benefit and cost to consumers varies depending on the product available.
Why offer consumer financing?
A major benefit of consumer financing for merchants is increased average order values. Customers can afford more when they buy something now and pay for it later, so you’ll likely find your customers add more to their baskets. Think pillows to accompany a new mattress, waterproof clothing to go with the new family bikes, or sunglasses to match new prescription glasses. Your customers can purchase more of the things they need but otherwise could not afford with consumer financing.
You’ll also gain access to a new pool of customers. Shoppers that may not have been able to afford your products before can now buy from you on finance. This increases the number of people you’re selling too, giving an extra boost to your sales.