Point-of-sale is one of the most exciting and fastest-growing forms of purchase financing for consumers and merchants. To help inform such a conversation, TransUnion analyzed over 440K POS financing consumers who had a POS inquiry. Our study looked at whether specific existing credit products are substituted post-POS financing, how these consumers perform across products and whether we can predict consumers likely to apply for POS financing.
Let’s begin by characterizing consumers in our study group who applied for POS financing from Q1 2019 through March 2021:
Financing at the point-of-sale is rapidly becoming a popular new type of credit. Consumers see several benefits, including availability at checkout, ease of application, predictable payment plans and smaller repayments that help afford larger purchases.
Consumers in our study demonstrated healthy rates of delinquency, reduced their overall unsecured debt across credit cards and personal loans faster, and opened new bankcards at a slightly higher rate than non-POS financing consumers. The majority showed an active preference toward this payment feature and viewed POS financing as an affordable option to promote merchant sales for purchasing goods.
Consumers who apply for POS financing loans are highly engaged in the credit market. Their utilization and payment behaviours across credit products indicate a higher probability of a POS financing loan application. To hone in on this, we used the trended credit data capabilities of TransUnion CreditVision® to analyze enhanced attributes to better predict the likelihood of consumers applying for POS financing in the next six to nine months. We discovered:
If we summarize the findings, POS financing consumers are younger, generally have lower credit scores, exhibit higher utilization of existing credit, and have more need for new credit options when compared to non-POS consumers. They also reduce or maintain their card balances post-inquiry at a higher rate and seem to prefer installment loans (possibly due to the consistent payment obligations spread over time). Consumers that utilize POS financing perform well and are on par with the general credit active population when it comes to delinquency. These are the characteristics of a highly valuable credit market segment.
To take advantage of significantly increased consumer appetite for POS financing, lenders could possibly incorporate these insights into existing account management strategies to enhance profitable growth. The benefits of adapting to and adopting this emerging credit trend include higher response rates on cross-selling loan campaigns, a significant share of overall credit wallet and measurably improved returns on marketing investments.
To learn how we can help you develop targeted acquisition strategies based on data-driven, predictive potential, contact your TransUnion representative.