Financing your expenses with borrowings like loans has been one of the most common ways if you talk about the dynamics of personal finance. The system of credit cards bought in a new way of financing but now this also has been a thing of the past. While buy now pay later is a popular financing trend these days there is another kind of financing that is less talked about. Yes, it is the Point of Sale Financing or POS financing. POS financing has been an intermediate kind of financing lying between the traditional credit card and the pay later scheme.
In POS you actually get finance for a certain category of goods, which are mostly consumer goods. Here you pay the amount that you borrowed to buy the goods. This is actually a kind of limited buy now and pay later scheme. You can buy the product at that time but the payment is due later. To know more about POS let’s take a deeper look into it.
Point Of Sale Loan
POS financing in actuality is a kind of loan if you see it technically. It is categorized as a personal loan. Here the point is that the POS financing is made available only when you buy some product like furniture, appliance, smartphone, etc. Which is unlike other kinds of borrowing. Unlike credit cards and loans where you can avail finance for anything here in POS, you get the amount only for the product you buy or a certain kind of product. Take an example to understand that. You are looking to buy a laptop online during a sale. You have been waiting for the sale however, due to some expenses now you don’t have sufficient money in your account. However, you would have the money available in some time. Now, say if you want to avoid using a credit card or its limit is low or maybe you don’t have it then what? Let go of the offer of sale and buy without discount later? That’s not an option when you get the POS finance. It would offer you instant payment for the product. Now, you can pay this later when you get a sufficient amount in your account or convert it into EMIs and pay with a certain interest rate each month.
What that example shows is that you get the funds instantly when you need that. The POS financing is offered on the instant as the purpose of your borrowing is clear to the lender. Most of the time the banks or NBFCs in collaboration with the online selling platforms offer this financing. The reason is that since the loan is available on purchase both the lender and the selling platform have benefits. The seller platform gets a low bounce rate and the checkout is made simpler by such an instant financing option. The lender on the other hand gets a good base of the e-commerce platform’s users as loan takers. Thus, it is a win-win game.
There is much to offer from POS financing than just quick and easy finance. When we talk about benefits, the business benefits of it are more. That is while the use or the loan taker has the advantage of easy access to finance for purchase the business overall has much more to gain. Some of the major benefits of this kind of financing include:
- Wide Coverage: One benefit of POS financing is that it covers those who are not eligible for a credit card or other kind of loan. That is the base of buyers is extended with POS. Here the youths and millennials who are in college or have just started earning get covered which actually forms a big base of shoppers online. This is also a kind of benefit for buyers like students and youngsters who get the desired product when in need with finance to be taken care of later.
- Boost To Sales: Since POS financing is associated with the sale and purchase of certain things it has a good role in boosting up sales. Leave online as per various surveys it is seen that retailers who have POS financing as an option have seen an increase in sales up to the tune of 9%. Further, it has led to a 33% rise in the average cart value of the purchases of the well. So, actually the relaxation and freedom a user feels while knowing it has to be paid later on adds to the profit of the sellers and of course the POS financers.
- Transparency: This is a kind of benefit that is for all the players involved in the process. From the point of view of the consumer of the loan taker, it’s more important. The reason is that they are not subjected to hidden charges like that of the credit card and are clear of what they are borrowing and they have to pay that only. This is one of the facts that users are freer in making financial decisions and making the move with POS. This in turn leads to high sales when the option is channelized.
POS financing as an option is quite to the point and clear as we have seen in our discussions so far. With credit cards not an option for everyone, POS has a great option to make space for itself. The POS has been parallelly growing between the buy now pay later and the credit card-based buying. The fact that the traditional credit user base is also turning towards the POS and buy now pay later options shows that the growth is exponential in the future for this new financing market.