Some things are instant hits — smartphones, television and voice-controlled personal assistants are all good examples of technologies that more or less hit the ground running and were popular as soon as marketing people were done explaining the concept to consumers.
Other innovations are late bloomers. ATM cards, Febreze and the FICO score were all around for a while languishing in relative obscurity until something happened to push them into mass consciousness.
Point of sale underwriting — installment loans offered to consumers at the point of purchase that let them finance their buy over time, usually three to six months — is more an example of the latter case. Though installment lending is far from new, and installment loans offered at the point of sale (POS) have been an popular form of alternative payment in other parts of the world, they had been relatively uncommon in the U.S. until a little over five years ago, when digital innovators and startups began developing the form as an alternative to store cards or consumers.
And while it might be a bit much to say that POS financing had a full “A Star Is Born” experience last week, it would not be an exaggeration to note that the last week’s various sizzles strongly indicate POS financing is no longer a fringe financial product so much as a mainstream financial tool gaining traction with some very established players.
Chief among them was was JPMorgan Chase, arguably the most mainstream and established bank in the country. The bank this week announced the launch of “My Chase Plan,” a tool that allows card customers to finance purchases of more than $500.
According to reports, Jennifer Piepszak, chief executive officer of JPMorgan’s card business, said that with the tool, customers can pay off purchases already made over a longer period of time and will be subject to monthly fees rather than charged interest.
“My Chase Plan” is being rolled out alongside “My Chase Loans,” which will enable customers to borrow money against unused credit card balances. Using the Chase mobile app, customers will be able to take their unused credit lines and transfer them to their checking accounts. Piepszak noted during Chase’s investor meeting that the loans will be for bigger purchases, such as a kitchen remodel.
“This will allow us to compete in the personal loan space, importantly without taking any incremental risk, as this will be a targeted product feature for our existing customers,” Piepszak said.
One might assume Affirm — the POS financing startup founded by PayPal Co-Founder Max Levchin — would be upset that the nation’s largest bank is throwing its hat into the vertical that Affirm more or less created with its launch in 2012.
One, however, would be assuming wrong. Levchin views JPMC’s new rollout as an excellent endorsement.
“It’s probably the greatest endorsement we’ll ever get,” Levchin told Cheddar. “Chase does not have to do anything, they're already the world’s largest credit card issuer … They're basically telling the world what Affirm's got is pretty valuable and important.”
It was, in a manner of speaking, Affirm’s second big endorsement of the week, with the first coming from Walmart.
The two firms announced that they’ve inked a deal that will bring Affirm’s POS financing product to Walmart.com and to about 4,000 of Walmart’s retail locations nationwide. The rollout, according to reports, has already begun and will continue for the next few weeks.
As is the case with other Affirm partners, potential customers can check their eligibility on Affirm’s website without risk to their credit score. Once approved, customers can finance amounts of $150 to $2,000 over a term of three to 12 months. To complete a purchase, consumers are offered a barcode that is scanned in store by a Walmart associate. The companies said “select items” such as alcohol, tobacco, groceries and money services, are not available for purchase through the Affirm/Walmart offering.
“Walmart serves millions and has become a leader in the retail landscape with its commitment to help shoppers ‘save money and live better,’ which closely mirrors our own mission to ‘improve lives’ with our products. I’m looking forward to introducing Walmart customers to a modern and innovative way to buy the things they need,” Levchin said of the pair-up.
Affirm does not charge fees for its product beyond what is quoted at the time of the original underwriting — customers know what they will be charged in total and every month, Levchin explained to PYMNTS in a December conversation.
“We see it as our responsibility to deliver products that don’t just say ‘hey here’s a tool, do what you will with it,’ but one that actually come with batteries included and an instruction manual that explains the best way to use it,” he said.
And it is a method, he noted, that is taking off — among consumers of all profiles at a wide variety of merchants.
“Many, many, many Americans are deciding this is a better alternative for them than [using] a credit card,” he said.
And perhaps many more still might, if the concept of POS financing is getting scale at the Walmart level. Or they might still use those credit cards — but in a very different way than they do now when it comes to big purchases, particularly if more issuers look to JPMorgan Chase’s offering and follow suit (and even if they don’t, given Chase’s size and scale as America’s largest card issuer).
It’s not enough to say that installment lending is a sure bet as the next big thing — all good payments peeps know there is no such thing as a sure thing.
But it’s certainly enough to hand over the Sizzle of the Week crown.
SWIFT: Reaches a tipping point as more than 50 percent of its cross-border payments have been completed using gpi, and marking a year-over-year increase of more than 270 percent. SWIFT also noted that more than $40 trillion was transferred over its gpi service in the past year.
Etsy: Strongest growth in four years seen across the eCommerce site, and where fourth quarter sales of about $200 million were up 47 percent year on year. In addition, buyers using the platform were up by 18 percent, and active sellers gained 9 percent. The company has said that it is gaining share in its arena of handmade goods.
CBD: Where there’s smoke, there is fire, the saying goes — and the U.S. cannabidiol market may be throwing off sparks. As many as 7 percent of Americans say they’ve used the substance. Elsewhere, Cowen & Co. has estimated that the market could be worth as much as $16 billion by 2025.
Crypto scams: The same week that JPMorgan CEO Jamie Dimon said he would not rule out crypto for use in consumer applications, news came that in India, an individual tricked 12 victims out of $250,000, with a fake initial coin offering named after a popular game show in that country.
Identity theft: The three chiefs of the three credit reporting bureaus — TransUnion, Experian and Equifax — went to Capitol Hill and got an earful about protecting consumers’ sensitive data amid massive breaches. Turns out that really nobody is safe — Equifax CEO Mark Begor stated that he has been victimized by identity theft three times in the past 10 years.
Brexit: No deal, maybe a deal, or maybe no exit at all. PM Theresa May agrees to a vote that may delay Brexit beyond the March 29 deadline that had been set in place years ago. In the midst of all the uncertainty, it is estimated that a disorderly Brexit process could cost businesses as much as $17 billion, as calculated by the U.K. government.