Innovative, new payment options like Buy Now, Pay Later (BNPL) and point-of-sale (POS) financing are becoming increasingly popular with consumers at checkout — due in large part to their low-friction, convenient nature. This holds especially true for Gen Z and Millennials, who accounted for over half of POS financing applicants in a recent study. And with 60% of consumers stating they’re likely to use POS financing in the next 6–12 months,1 many lenders are eager to engage with this substantial, younger consumer cohort.
As lenders explore these new forms of purchase financing, they are finding that POS and BNPL lending does not follow a traditional customer acquisition model. Whereas traditional lenders market to consumers directly via organic digital marketing, lead aggregators and direct mail, POS lenders rely on retailers for consumer access and engagement, and present offers at checkout. While this indirect method can expand reach into transactions and may reduce acquisition costs, it also presents marketing and onboarding challenges POS lenders are looking to address.
POS and BNPL lenders looking to improve digital consumer engagement and influence consumer usage can now extend firm offers of credit to a retailer’s customer base — tapping into new high-potential audiences — while bringing more value to their merchant partners. TransUnion Prescreen Solutions enable lenders to prescreen their retail partner’s customer base and present firm offers of credit via their retail partner’s digital channels. Lenders can engage directly with a retailer’s customers while directing consumer traffic to the retailer, ultimately driving new consumer transactions for both parties. While maintaining firm control of their credit policy, lenders decide which customers will receive offers — delivered via the retailer’s website or mobile app in the lender’s name. Instead of relying on product placement at checkout, when the cart of the retailer’s customer (order size) is already final, lenders can promote new offers of credit proactively to help retailers grow revenue.
In addition, lenders aiming to strengthen their brand awareness among consumers, reengage former declines, grow customer relationships, and capture former customers — all via digital channels — can proactively generate and distribute new offers.
TransUnion’s prequalification remarketing solution enables lenders to proactively market new prequalification offers to consumers, which can be used to fund additional purchases with a lender’s retail partners — ultimately encouraging more frequent consumer usage and growing transactions for lenders and retailers alike. Lenders obtain consumer permission to pull their credit files for a full twelve months, enabling them to send these consumers new prequalification offers every month. This form of remarketing transforms the prequalification process from consumer-initiated to lender-initiated, and delivers great value to lenders looking to reengage with former declines and abandons while evolving customer relationships with cross-sell offers. Prequalification remarketing offers even greater promise for POS and BNPL lenders looking to drive repeat usage — with the lender obtaining the consumer’s advance consent to access their credit file over a twelve-month period — overcoming the challenge lenders face in fostering deeper relationships with consumers via shorter-term loans.
For POS and BNPL lenders, supporting their retail partners’ objectives of optimizing gross sales — which means approving more consumers with larger offers — can result in elevated credit exposure. But in the face of growing competition for key retail partnerships, lenders must strategically balance supporting their partners’ funding objectives with protecting themselves against deteriorating loan performance. TransUnion’s rich trended credit and alternative datasets offer lenders a more refined understanding of risk in real time, enabling them to approve more consumers and extend larger loans without needing to increase risk exposure. By incorporating traditional and non-traditional credit data — including trended credit and alternative data, as well as verified income and employment data — POS and BNPL lenders can expand their universe of approved consumers and fund larger purchases without having to take on greater risk. By providing POS and BNPL lenders with the right tools, TransUnion is helping this new breed of lender meet merchant partners’ expectations — a strategic imperative in today’s competitive POS/BNPL marketplace — while maintaining targeted loan performance.
1 McKinsey & Company. (July 2021) Buy now, pay later: Five business models to compete