Shifts in consumer beliefs and spending patterns clearly reveal that traditional models of payments and financing are no longer adequate. Retailers simply cannot afford to continue ignoring the payment experience, an integral part of the buyer-seller relationship.
It’s vital to view payments not merely as transactions, but also as marketing opportunities that provide a positive and memorable experience and nurture brand loyalty. Let’s talk about why that is and how you can stay ahead of the curve.
Payment options must reflect consumers’ new relationship with money.
Despite a recovery in spending in many sectors of the market and an uptick in borrowing since the 2008 financial crisis, many U.S. consumers don’t trust traditional banking institutions. Four of the top banks are among the 10 least-liked brands according to millennials, the largest consumer segment in our economy.
Offering only traditional payment options like credit cards can alienate a large segment of consumers. Millennials, who will account for over a third of retail spend in less than four years, are turning away from credit card use relative to previous generations. In fact, the percentage of Americans under 35 who even hold a credit card has dropped to its lowest level since the Fed began tracking this kind of data in 1989. These younger consumers, who have only just begun to build their credit profiles, are seeking friendly payment solutions that don’t have the gimmicks and hidden costs of credit cards and won’t add to their already burdensome student loan debt.
To overcome this hurdle, retailers need to offer more transparent payment alternatives in order to make purchases more accessible and affordable to customers, including those underserved by traditional financial institutions. In order to deploy this option effectively, retailers must tell consumers, in clear and simple terms, exactly what they’ll owe up front with no hidden fees. This transparency builds trust and brand loyalty. Innovations in financial technology have also ushered in more advanced and modern underwriting models, which afford more customers the chance to buy more and more often than FICO-based lending options.
You must differentiate to thrive in the age of Amazon.
As we all know, Amazon dominates the e-commerce world. Forrester Research estimates that U.S. e-commerce sales will grow to more than $530 billion by 2020, and according to analysts at Macquarie Research, Amazon will account for half of all this growth. This means that every other merchant—from Best Buy to your neighborhood bike shop—is fighting for 50 cents of every new dollar spent online. In today’s Amazon era, differentiation is more critical than ever if you want to win new customers and cultivate loyalty.
And, while it’s true that incorporating the latest tech innovations and marketing methodologies is vital to staying ahead of the competition, flashy advertising and newfangled gizmos can alienate customers and damage brand equity if taken too far. Fortunately, the payment experience also has a huge impact on your top line—while potentially being free of these drawbacks. And, the most exciting part is that most of this potential remains untapped.
Innovative payment options are a win-win.
By offering flexible and affordable financing options—and by broadcasting these options throughout the customer journey—you’re able to gain an edge over other retailers. When your customers experience convenient, seamless, and transparent financing options, they see it as a valuable incentive offered by you, the retailer, and return as loyal shoppers. By allowing them to pay over time, a larger and more diverse population of shoppers can then afford what they want when they want it, increasing their likelihood to convert and their AOV.
Savvy marketers always aim to establish long-term relationships with their customers, working hard to understand their wants and needs—which are ultimately the fundamental drivers of your business. By providing a more attractive and flexible payment experience, you circumvent the pitfalls of traditional financing while simultaneously building customer trust and loyalty that drives revenue to your top line.