What if you could “seal the sale” every time a shopper, including those with developing credit, entered your store? It would be a massive surge in revenue for your store, wouldn’t it?
When retailers offer a convenient payment option for those with developing credit, they create massive new opportunities. Why not provide consumers with the option to get what they want without pressure to pay the entire amount at consummation or go through an extensive credit check. You may think it’s a risk, but not if you use a third party that handles it all.
Over 45 million Americans have no credit score. They can afford monthly payments for big-ticket items, but they can’t get a credit card or traditional financing.
This post will explain how a lease-to-own option enables more shoppers to obtain goods with a cash price of up to $3,500 in minutes with minimal risk to the retailer.
What Are eCommerce Financing Options in The Market?
There are three types of consumer financing for eCommerce. Let’s take a quick look at each:
1. Credit Cards
Credit cards are the most convenient and popular choice for consumers who can get one. However, consumers pay a median interest rate of 19.49% on their unpaid balances. Low introductory rates can skyrocket to 29% if they miss one payment.
Merchants give up a substantial profit margin handling credit card transactions too. They typically pay a fee plus a percent for every transaction, reducing their net revenue.
2. In-Store Financing
Brands that can afford to manage in-store credit have complete control over the payments, interest, and marketing to their customers. However, it’s expensive to start and maintain an in-store program. It’s out of reach for most small to mid-sized brands.
Shoppers pay interest rates similar to credit cards, plus they are limited to shopping at one store brand.
3. Third Party Consumer Financing
This method makes sense for any size retailer, both online and in-store. eCommerce point-of-sale lease-purchase options open the doors to millions of US consumers with evolving credit. Statistically speaking, 47% of U.S. shoppers need some kind of financing for a purchase of $400 or more. Without offering lease-to-own or no-credit-needed options, many consumers simply cannot transact with the retailer.
Lease-to-own enables consumers to obtain expensive items like furniture, electronics, and appliances without a long-term commitment. Consumers have options with lease-to-own and can do any of the following after the initial lease term (typically two weeks or one month); make a lease payment on recurring lease renewal dates and continue using the item(s), purchase the item(s) via the early purchase option, or return the item(s) without penalty.
When a retailer partners with a third-party lease-purchase company, it shows the retailer's valued consumers it cares about their ability to obtain big-ticket items with no or developing credit. By offering POS payment options, retailers can tap into an underserved market worth $49 billion.
Leading the way is a company called Katapult Group, Inc. This company provides alternative point-of-sale payment solutions to omnichannel retailers. It has proprietary technology that uses a fast 3-step application process providing customers with approval decisions within a couple of minutes.
Katapult – No Credit Needed, No Long-Term Obligation
Katapult is a Texas company founded in 2014. This omnichannel lease-purchase platform company provides an alternative to traditional financing solutions for retailers and shoppers. It partners with hundreds of established retailers in the United States.
Katapult offers five distinct advantages as a lease-purchase partner:
1. Real-Time Approval
Katapult’s system utilizes the latest decision-making technology to approve customers without a credit check. Customers go through a 3-step process and fill in a 14 point questionnaire. It provides customers with a 60-second approval decision. If approved, they can complete the transaction right away.
2. Increases Sales
By offering lease-purchase options, your products become accessible to a higher percentage of shoppers who previously could not transact with you.
3. Excellent Customer Retention
One shopping poll revealed that 93% of customers who previously used Katapult said they would use it again. Katapult uses a 60-second approval process, and shoppers can lease-purchase items with a cash price of up to $3,500 on the spot if approved. Katapult provides shoppers flexibility by allowing them to own the items early, continue leasing the items, or return the items without penalty. Customers with no or evolving credit can be approved.
4. Katapult Pays You Upfront
Once a customer is approved and completes the transaction, Katapult pays the retailer for the item’s cash price. They take on the risk of collecting lease payments directly from the customer. This limits merchant risk and increases immediate cash flow to the retailer.
Katapult customers enter into a lease-purchase agreement, not a credit transaction. Lease-to-own payments do not include an interest rate or APR. It’s a simple payment option that offers shoppers an alternative way to obtain what they need.
5. Happy Customers
By providing customers with a payment option that doesn’t rely on a traditional credit score, merchants develop new customers who would otherwise be unable to buy what they need. Retailers build loyal, happy customers who become repeat customers. The average order value for Katapult transactions is about $600. It has a 4.4 out of 5 ratings from over 13,000 customers on Trustpilot. Here is a sample review from Trustpilot:
“I needed to get my son, who is moving back to college for his sophomore year, a new bed frame. My credit is not the best, so the fact that Katapult could work with me was amazing, especially considering that I am a single mom who is also shopping for a high school student. Small payments with the ability to pay off sooner than expected are very convenient.”
Ready-Made Integrations for Major eCommerce Platforms
Katapult’s omnichannel solution integrates with online eCommerce platforms such as BigCommerce, Magento, Shopify, etc., using a simple plugin extension. Merchants can also add the payment app directly to their websites or for in-store purchases.
“It is exciting to partner with new retailers and give them a way to provide non prime consumers access to their products. Not only does it open the retailer’s brand to more consumers, it helps to increase brand loyalty because more shoppers have a way to obtain what they need, when they need it.”
– Tony Cerino, VP of Sales at Katapult
Consumers get a seamless checkout experience, and retailers usually get quick funding.
Your Marketing & Development Resources
Katapult includes marketing resources such as pre-made landing pages, buttons, and banners to help your customers learn about and take advantage of the program. It has all the information and support you need to integrate the lease-to-own program for your store.
Katapult has comprehensive installation guides for each platform plus deployment checklists to quickly get the app up and running.