E-Commerce retailers in the U.S. recognize the value of instant financing offers, and 64% believe providing financing options through their online store is important to driving new and increased sales, according to a survey from Klarna. Another 46% believe such services decrease cart abandonment, which is a pressing concern for retailers.
Instant financing is a revolving line of credit that shoppers can apply for during online checkout, letting them spread payments out over time with low annual percentage rate (APR) offers. The option is particularly appealing to Millennials, as fewer than 33% of them carry credit cards, according to a 2016 Bankrate survey.
“Instant financing is clearly recognized by online merchants as a means to attract consumers by providing additional freedom, flexibility and buying power,” said Jim Lofgren, CEO at Klarna North America in a statement. “The speed and simplicity with which consumers can apply and be approved for instant financing is widely believed to convert more sales.”
Merchants identify the three most important features of POS financing as: simplicity of online application, speed of approval and keeping consumers on their sites during the approval process. Retailers’ enthusiasm for online financing is shared by shoppers, and a 2017 Researchscape International survey conducted on behalf of Klarna found that consumers:
- Prefer online merchants that offer instant financing (75%);
- Want to be presented with an instant financing option when shopping online (47%);
- Would spend more if given instant credit options when making a purchase (39%); and
- Are very or completely likely to change retailers to use instant financing (28%).
Despite the rising interest, instant financing is still used only in a minority of e-Commerce transactions: just 28% of shoppers have used instant financing to make a purchase.