Products like buy now, pay later (BNPL) have retrained consumers to expect fast credit decisions — ideally in their favor — at the point of sale, whether online or in-store and that expectation now extends to all forms of nontraditional consumer lending. At the same time, merchants need flexible solutions that fund more consumers across the credit spectrum.
At a time when prime lenders are holding back and consumers are exhausting revolving credit balances, the need for alternatives — even to BNPL — are acute, and the platform marketplace model is filling this void with choice and cascading strategies that preserve conversions.
Saying that credit aggregation has “changed radically” from what it looked like pre-pandemic, Versatile Credit President Vicki Turjan told PYMNTS that having the lending marketplace model is “wonderful for the ecosystem. Ultimately, it’s just an incredibly effective sales tool.”
As paycheck-to-paycheck living expands and inflation drains buying power to its lowest point in 40 years, more applicants are near-prime or subprime — but their money still spends.
“There’s all different levels of consumers that meet different criteria for the FICO spectrum, and they’re looking for different products,” she said. “There’s installment products, there’s revolving products, there’s leasing products. It’s a lot for store personnel to try to present them all in the perfect time and do it in the most frictionless, expedient manner.”
With 36 lenders on its platform, Versatile is among the FinTech lending innovators who know there’s a match for most consumers seeking financing. And the seamless way of doing this for alt-finance is at the platform marketplace level, not at the point of sale.
“Nobody wants to be in a conversation where somebody’s denied,” Turjan said. “Having the automation which quickly gets to the right product is invaluable. There’s two philosophies: You either have a ‘drive the sale’ credit environment, or you have a ‘save the sale’ credit environment.
“We look at the way that retailer presents credit, and we tailor our system to that particular retailer’s process. We don’t sell a widget.”
Read more: Merchants Give Installment Loans Fresh Look as Consumers Seek New Payment Options
Easing Retailers’ Burden
To customize lending solutions for merchants, factors from business rules to presentment all come into play. Those must be baked in for the credit program to become a revenue stream.
Turjan told PYMNTS that Versatile embeds that logic to automate processes, which gets to the right match faster and with greater accuracy. Choice is also central to the solution.
“We have lots of different lenders,” she said. “If you didn’t have a credit aggregation system, theoretically, you’re either going to a portal of that particular lender, or you’re doing an integration with multiple lenders. For our retailers, it’s one integration with us, and then you have access to 36 lenders. That’s an incredible amount of choice.”
That’s perhaps the core appeal of the lending marketplace, and it’s finding supporters from smaller merchants to enterprise clients.
Calling the amount of lending choice today “a bit overwhelming” for retailers in the market for flexible credit solutions, she added, “Maybe stores would have done this on their own with proprietary waterfalls, but it’s getting too convoluted.”
“Then there’s always the issue of legal and compliance. You want to make sure that however you’re presenting those products, you’re doing it a compliant manner. Certainly, the lenders want to make sure you’re doing it in a compliant manner.”
True enough, but placing the burden of these integrations on retail tech teams already stretched to the limit isn’t the smart way, especially given the problems they need to be solved.
“How do they best present their credit program? How do you deal with the fact that lenders have installment products versus revolver products? How do you add leasing? You want to make sure that you’re offering the best product,” she said.
See also: Inflation, Credit Pressures Manageable for BNPL Providers Amid Soaring Volumes
Financing Drives Revenues
What retailers know but can’t always act on as they would like is the fundamental fact that credit drives conversions, and at a time when every sale matters, that’s a vital consideration.
“Financing drives revenue. You want that consumer to feel comfortable going through that app and they want to get to that ‘yes’ so they can get to that purchase,” she said. “Those 12 months same as cash [are] helping the consumer get what they need and stretch their budget.”
Versatile Credit has been at the forefront of the cascading approach to credit, which again goes to the function of marketplaces where lenders are vying for clients. They want to lend.
On the subject of how cascading can be effective in extending credit across the FICO spectrum, Turjan said “it allows you to, in the most expedient manner, connect that consumer with the absolute perfect financing product to, again, turn that consumer, that shopper, into a buyer, as well as create a very loyal customer.
“Customers feel good if you can satisfy their needs and give them choice and they walk out of there feeling like it is good experience.”
With the Versatile brand in the background via white labeling, she said, “We are the plumbers, and proud to be the plumbers. We are creating the infrastructure, tailoring it specifically to that retailer so they can drive revenue.”
We’re always on the lookout for opportunities to partner with innovators and disruptors.
Learn More