Like so much else considered from a pre- and post-COVID perspective, traditional ways of measuring creditworthiness – and extending credit – are no longer applicable in today’s omnichannel environment.
This, according to Versatile credit Innovation Director Bill Kratzerwho told PYMNTS that there is a growing appetite from merchants and consumers to have ready loan products that aren’t necessarily built around a credit score.
“As we sink deeper into an uncertain economy, we’re going to see this trend accelerate,” Kratzer said.
Credit card debt and related finance charges are at levels not seen in years, and household budgets are stretched to historic limits.
Although most consumers are aware that applying for a card online, at a bank or at a merchant can have a negative impact on their credit score, merchants and lenders are also aware of the inherent value in giving consumer choices to allow them to choose the option that best suits them. Doing all of this while and where they shop is the new gold standard.
Watch the funnel
Although the process has changed on both sides, there are still certain rules and procedures to follow.
“You have to deliver something that’s going to be frictionless if you want to capture customers in your funnel,” he said.
In this context, the consumer who buys on his tablet can find items that he covets, but which are expensive. But with three or four relevant data, they can know in seconds if they qualify for a revolving credit, promotional financing or an installment loan plan. Or they could be allowed to easily switch their profile to an in-store setting (say they buy a sofa and want to try it out), and the funding and offers could travel with them.
There is an obvious downside to not offering that choice and transparency, Kratzer said. A merchant is just one click away from losing business when a consumer switches to their nearest competitor.
Behind the scenes, the wealth of data and advanced technology can help merchants leverage multiple lending choices, spanning primary lenders, secondary lenders, and even tertiary lenders.
Omnichannel interactions, he said, “are an intimate selling process — and there are many different ways to analyze the data,” including merchants having the increased ability to see what drives consumers to finance their purchases and then close the sale.
“You can pull the data to see which of these options are used most effectively,” Kratzer said, as well as what those consumers are looking for when making a purchase. “Merchants need to know how their channels are performing.”
Data analysis can help reveal why people might walk away from offers or if the promotional mix needs to be adjusted. Just looking at approval rates, average line assignments, or average loans can mean merchants are missing opportunities to rethink how they interact with their end markets.
Along the way, merchants and lenders can measure success in different ways. While traditional metrics like approval rates may not apply, a new funnel shape that attracts and treats more “good customers” could be considered a better “net.”
“The overall results speak for themselves,” Kratzer said, “and as more people get approved overall and more people have more funding options at their fingertips, more consumers will take advantage of these options.”
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