Data Offers Lenders New Tools to Serve Underserved Consumers

Inflation is raging and credit card debt is at record levels.

Merchants who want to help convince consumers at the point of sale to commit to the sale can leverage omnichannel financing as part of their strategy.

And as Versatile Credit Chief Technology Officer Joe Sharp told PYMNTS, a full-spectrum, data-driven financing program can help connect a range of lenders and consumers to access the financing they need to get the goods and services they want.

A full-spectrum program helps enterprises ensure their financing efforts serve the entire demographic population of the customer bases, he said. That means offering financing to higher-income, higher FICO customers but also lower-income, lower FICO customers — no matter who has solid, long-standing credit histories or doesn’t.

The right financing program also needs to take into account the purchase volumes and capacity that merchants need from their customer populations — with the right lenders in the mix, Sharp said.

“If you don’t have an approval limit that satisfies the ‘purchase need,’ then you’ve missed the mark,” he explained.

To that end, Versatile Credit, which enables lenders and merchants to reach consumers across online and brick-and-mortar channels, has seen a “broadening” of its lending partners that can service purchases of as much as $40,000 — where those ticket sizes might be most easily seen in verticals such as home improvement or elective medical procedures, he said.

“We’ve also seen [a broadening of lenders] in the other direction” for purchases below $1,000, where installment plans might prove especially attractive, he said.

The platform model enables data to be collected and analyzed, upfront, about the purchase, the product category and price points to create a finance “waterfall” that finds the most relevant financing offers from the lenders’ pool and presents them to the consumer, without overwhelming the individual, he said.

The data helps merchants reach underserved populations and can answer pressing questions.

“Are they a customer that’s most concerned about their payment?” he said. “Are they concerned most about overall cost of a loan? Are they most concerned about the APR that they’re paying? We can take all of that into consideration and drive them toward an option that most closely matches what we think they’re going to want to use to make that purchase.”

Full-spectrum programs are successful when identifying lenders who specialize in certain industries and can prove most adept at servicing loans after the financing has been initially extended and embraced by the customer.

“Understanding the type of customer you’re approving allows these lenders to take risks on those types of approvals that maybe someone who doesn’t specialize in the space wouldn’t be able to take,” Sharp said.

Looking Ahead

Asked about the overall financing environment in 2023, where inflation is only now beginning to back off record levels, Sharp noted that consumers are becoming more “flexible” about financing and understand that they will likely need to pay at least some interest on loans, where they had been used to getting 0% financing in the past.

“This opens up the product types that they’re willing to entertain in a financing program,” said Sharp, who added that “it actually broadens the type of products you can offer them that are appealing.”

Looking out at the rest of 2023, Sharp said there remains a significant opportunity to offer embedded finance across high- and low-dollar transactions, such as in consumer electronics and even subscription plans.

The right financing mix, he told PYMNTS, can help cement consumer loyalty and brand loyalty.

“It’s easier to get a return customer that makes several purchases, even at lower dollar volumes, with that branded payment vehicle than may have been possible previously without it,” he said.