Editor’s Note: This blog entry was originally published on June 23, 2020, and was updated on April 13, 2021.
What is Alternative Financing?
Alternative financing is a new online payment method involving short-term loans at the point of sale (POS). It offers customers the opportunity to purchase a product now and pay later, in installments.
Two examples of potential alternative financing use cases are online purchases and healthcare payments.
One way this new payment method can be used is when making a purchase online. A customer purchases an item online (such as furniture or an appliance) and through alternative financing, has the option to pay for the item in installments.
Another example of this new online payment method in action is when a patient pays in installments for healthcare visits. They can also use alternative financing to pay for repeat visits or treatments through patient payment plans. In addition, elective surgeries and procedures are one of the largest points of alternative financing in the healthcare space.
Benefits of Alternative Financing
Benefits to the Developer
- Versatility - This payment functionality allows software developers to offer more ways for their customers to get paid & grow their business. It offers additional payment methods for purchasers who may need these options. Alternative financing allows developers to give merchants flexibility as to what financing options are offered to their customers.
- Competitiveness - This payment method is becoming a popular option across industries. Total transaction value in the alternative financing segment amounts to $6,117.2m in 2020, and is expected to grow to $9,472.9m by 2024. Software developers need to offer this functionality within their solution in order to keep up with their competitors. It’s a product differentiator that can increase adoption of your software solution.
- Revenue - Alternative financing drives another revenue stream for both developers and their merchants. It can increase volume at merchants’ stores, which allows developers to demonstrate how their software can help drive consumer spending.
Benefits to the Developer’s Customers
- Flexibility - Allowing merchants to offer their customers additional payment options is especially beneficial when a customer's cash flow is limited. It provides purchasers with an alternative to credit cards. Further, the ability to make set monthly payments allows for better budgeting.
- Timeliness - Alternative financing provides a “buy now pay later” method of payment that allows a merchant’s customers to get their item quicker. It’s essentially the opposite of layaway. With layaway, a customer pays for an item in installments over time and they don’t receive the item until they’ve paid in full. With alternative financing, a customer can purchase an item and then pay for it in installments after they’ve received it. These alternative payment options allow people to buy goods and services they want or need but couldn’t afford to pay for in full at the time. They can also be leveraged strategically to help with necessities such as automobile maintenance.
- Higher Revenue - Offering alternative payment options increases the purchasing power for the end customer. It’s been shown that offering alternative financing results in a higher number of sales and higher average order values for merchants. A recent Forrester study showed that offering an alternative financing option can result in a 17% increase in incremental sales and a 15% increase in average order value. In addition, a recent Cardify.ai survey found that nearly half of U.S. survey respondents said BNPL plans would allow them to spend 10% to 20% more than they would with just a credit card.
Alternative Financing Solutions from Global Payments Integrated
New research from The Ascent shows that as of March 2021, 55.8% of consumers have used a buy now pay later service. That percentage is up from 37.65% in July of 2020 - an increase of almost 50% in less than one year.
To keep current with the competition and provide customers with functionality for the ways they want to pay, ISVs need to offer an alternative finance program within their software solution. Delay Pay, the new alternative financing solution from Global Payments Integrated, fits the bill.
Unlike many existing alternative financing solutions that are geared only toward large corporations, our solution can also be used by small and medium businesses, helping them to level the playing field with their larger competitors - and we offer multiple lenders to choose from.
Our alternative financing solution is applicable across all verticals, not only eCommerce or health like many other available products. It’s a great solution for industries that are currently starting back up after having been closed during the pandemic. As an example, a summer camp could use it to give parents more flexibility in paying tuition for their child.
Delay Pay also augments our commerce enablement solutions. By deploying alternative financing throughout the omnichannel experience, we offer you the flexibility of getting it in front of consumers at every point of the buying experience.
Implementation of Delay Pay is simple for ISVs. It’s offered through our current APIs, so you don’t have to code to different engines or solutions. Plus, Delay Pay is fluent to other value-added solutions we offer - so they all interact and use the data they share to make themselves smarter.
Alternative financing is a new payment method that offers many benefits to both software developers and their merchants, such as more flexibility and a new revenue stream. Consumers want multiple options for payment and your solution needs to keep up with the changing times - are you prepared? Contact us today to learn more about integrating alternative financing functionality into your software solution.