Multi-lenders use a network of financing options, funneled through a single user checkout experience. Customer data isn’t processed against a set of uniform terms targeted at prime applicants. Instead, it’s put through a “waterfall” of diverse banks, with a variety of financing options provided to the consumer at approval.

The waterfall method is simple. A consumer point of sale financing application is checked against the prime lenders for approval, and if declined, it moves down to near-prime options. From there, sub-prime options are explored and so on, all the way down to lease-to-own financing options, all in one single application with results back in under 2 seconds!

Because multiple bank-lenders are checked in the waterfall, different rates and terms are available to shoppers once approved, allowing them to pick the best-personalized offer for them at checkout.

• What Is Multi Lenders In POS Financing?
• What is point-of-sale financing?
• How does Point of Sale Financing Work?
• What is a POS Lender?
• How can I offer POS financing?
• What does POS mean in Banking?
• How is the Growth of POS Financing Both a Threat and Opportunity?
• Why Point-of-Sale Finance Growing in Popularity
• What are some Selections of Point-of-sale Programs?
• How do you Finance Online Purchases?
• What do Banks Charge for POS?
• How long does a POS Transaction take?

What Is Multi Lenders In POS Financing?

Multi-lender point of sale financing platforms are fairly new. For example, ChargeAfter is the first global network to provide a complete solution to merchants for point of sale financing from multiple lenders. ChargeAfter works with a network of over 10 lenders (and adding more constantly). At checkout, the consumer fills out a short, four field application, consisting of their name, address, social security, and phone number.

Read Also: Top 6 Payment Gateways That You Can Use for Your New eCommerce Website

The application then goes through a “waterfall” of diverse lenders who offer financing to consumers across every credit type. Finally, personalized financing options appear. ChargeAfter is able to provide merchants with 85% financing approval rates.

What is point-of-sale financing?

Point-of-sale financing enables consumers to break up payments for certain items over a period of time. Merchants provide a way to purchase a product now while the consumer pays for the product over a period of time determined by the lender. Lending at the point-of-sale is also known as open-loop brand credit cards, closed-loop store credit cards, and retail installment loans.

Growing demand for this type of unsecured lending coupled with the growth in e-commerce purchasing over the last two decades has created an opportunity for financial institutions. Filene Research Institute estimates the total point-of-sale financing market at $391 billion, equating to approximately 3.5% of annual consumer spending. 

How does Point of Sale Financing Work?

Point-of-sale financing holds unique value for consumers, lenders, and merchants alike.  Cloud-based solutions empower merchants to offer customized financing options for purchases both online and in-store.

How it works

• The consumer selects financing options while finalizing the purchase.
• The consumer’s information is securely passed from the merchant to the lender for loan decisioning.
• A decision is made by the lender and the consumer is presented with options for point-of-sale financing on their purchase.
• The consumer chooses the financing terms that are right for them and purchases the item.

What is a POS Lender?

Point of sale financing is when the merchant offers their customers a financial solution at the point of purchase, in order to assist them in buying the product or service. POS financing is a type of consumer finance and refers to open loop credit cards, closed loop store cards and installment loans. 

POS loans have been around for a long time, for example when buying large items of furniture, and car loans. However, POS lending has expanded in recent times, due to technological advances that have made installment loan options available immediately online and on mobile phones, providing clear repayment terms before the loan is taken out. These advances have also made it easier for point-of-sale finance to be offered by all sectors of retailer.

How can I offer POS financing?

These are the stages to offering your customers POS financing:

1. Ensure there is a need for customer finance in your business. Are customers looking at products that they can’t purchase at the full price upfront? 
2. Once you have worked out which point-of-sale lending platform suits your needs, ensure that you advertise to your customers that consumer finance is available.
3. Customers ideally should be able to apply for financing in store, online and using their mobile phone.
4. The customer should be able to find out almost immediately whether they are eligible for a POS loan. 
5. Your customer receives the product instantly and you the retailer will receive the funds straight away. The customer will have a repayment schedule from the loan provider.
6. Be aware that you are likely to have to pay a small fee per transaction as you would need to with a credit card.

What does POS mean in Banking?

A POS System is the actual software and hardware you use to manage your business. It’s the tool you use to analyze and order your inventory, employees, customers, and sales. 

Traditionally, POS systems were on-premise, which means they used an on-site server and could only run in a specific area of your store. That’s why your desktop computer, cash register, receipt printer, barcode scanner, and payment processor were all set up at your front desk and couldn’t be moved (well, moved hassle-free).  

In the early 2000s, a big technological breakthrough happened: the cloud. With the advent of cloud-based storage and computing came the next step in POS technologies evolution: mobility.

What hardware does a POS system need?

The hardware products you need can vary depending on your business type. We’ve listed the most common hardware used by the retailer, but keep in mind that not every business needs all of these products. 

1. POS terminal
2. Credit card reader
3. Receipt printer
4. Barcode scanner
5. Cash drawer

1. POS terminal

A POS terminal is the device that the mobile POS software runs on. 

For old-school, on-premise systems, the cash register was the POS terminal. For the newer options, merchants can use either a desktop computer, laptop, tablet, or smartphone—any device with internet connectivity.

Many retailers opt to use tablets, like an iPad, with a stand that turns them into a countertop device. The advantage of this setup is in its inherent flexibility. Sales clerks have the freedom to pick up their tablet, look up inventory, access customer profiles, and process transactions anywhere on the sales floor. 

2. Credit card reader

This is also referred to as a credit card terminal—it’s what merchants use to accept credit and debit card payments. 

There are three ways a credit card can accept payments:

1. Reading the card’s magstripe (swiping the card) 
2. Reading the card’s chip through an EMV (Europay, Mastercard, or Visa)
3. Using near-field communication (NFC) to accept payments from mobile payment providers like ApplePay

Most consumers prefer cashless payments. By 2025, Business Insider predicts that 75% of all transactions will be cashless. Why? Because cashless payments are typically quicker and more efficient, which leave the customer with more time to do their thing. 

The best credit card reader features

• Print or email receipts
• Take any payment (swipe, tap, or insert)
• POS-integrated payment processing 

3. Receipt printer

While the majority of consumers now opt for email receipts, it’s still important to offer printed receipts. 

Similarly to cash drawers and barcode scanners, receipt printers can connect to a merchant’s POS terminal via USB or Bluetooth. Most POS system providers can also provide you with receipt printer paper. 

4. Barcode scanner

Retailers with a lot of inventory need a barcode scanner to help them manage, stock, and speed up their checkout process. Similar to receipt printers and cash drawers, you can connect a barcode scanner to and compatible POS terminal either by USB or Bluetooth.

5. Cash drawer

To support the customers that still want to pay cash, most businesses need a cash drawer. They generally come in several sizes to support all business types. 

As with barcode scanners and receipt printers, most cash POS-compatible cash drawers can connect to the POS terminal either by USB or Bluetooth. 

Most POS system providers provide you with a list of compatible hardware and can get you set up with what you need with minimal hassle. With Lightspeed, you can get everything you need with our wireless hardware bundle.

How is the Growth of POS Financing Both a Threat and Opportunity?

“Buy now, pay later” evokes images of the 1950s and ’60s, when “layaway” plans were a staple of installment lending. The arrival and popularity of credit cards, with their near-universal acceptance and convenience, pushed aside buying “on time,” even for higher ticket consumer goods.

But some key factors have begun to change the scenery, and now plastic is in the crosshairs. Multiple new ways of obtaining short-term consumer loans — as purchases are being made — are beginning to impact card use.

“Point-of-sale finance is a new application of an old idea. You’re going to see more traditional lenders come up with competitive offerings.”
— Paul Siegfried, TransUnion

Technology-enabled Point-of-sale Finance, or Point-of-sale Lending, has become attractive to all three legs of the consumer credit stool. It appeals to consumers who want what they want — now — but with somewhat more control and more flexibility than traditional credit card purchases allow.

And it appeals to both online and store-based merchants who want even more ways to enable them to make a sale while the consumer is hot to trot. Some of the trendiest online merchants, with major appeal to Millennials and Gen Z purchasers, have climbed aboard point-of-sale acceptance.

Players jumping into point-of-sale finance range from mainstream banks large and small to large ecommerce and traditional retailers to credit card and payments companies to fintechs like Affirm (founded by PayPal Co-Founder Max Levchin) to specialized firms that function as go-betweens serving lenders, merchants and their ultimate borrowers.

Getting a precise fix on the size of this market is difficult because there are different ways of providing the service. Credit bureaus like TransUnion don’t back out point-of-sale personal loans, explains Paul Siegfried, Senior Vice President and Credit Card Business Leader. However, he says, this form of finance has been growing as more providers are drawn to it.

Some types of goods and services have seen low-tech use of POS finance for years. Dental practices, for example, have offered third-party financing for elective procedures like braces. Siegfried says evidence is mounting of more widespread use.

One manifestation is the falloff in use of private label cards in comparison to bank cards, which Siegfried credits more to growth of point-of-sale financing. He says that consumers who may have previously financed purchases from clothing to electronics to home improvement materials with a private-label card have leaned towards POS finance.

Why Point-of-Sale Finance Growing in Popularity

How large is the point-of-sale market, potentially? A commonly cited projection, made a couple of years ago, comes from Accenture, which believes point-of-sale finance could represent a more than $1.8 trillion opportunity.

What has driven this shift in appetite from the American-as-apple-pie bank card to an updated throwback to the earliest days of post-World War II consumer finance? Four factors have been at work:

1. Millennials became a bigger part of the consumer credit picture. Many didn’t want to live off credit cards, but often they couldn’t or didn’t want to put off certain larger purchases, such as furniture, and travel, especially meaningful for a generation that some say treasures experiences over things.
2. Algorithms and lightning-fast data communications created the ability to check credit records and weigh a consumer’s relative risk almost instantly. A key element of today’s POS finance programs is speed, plus convenience.
3. With the mass adoption of mobile phones and the arrival of the Age of the App, the ability to access a form of credit nearly as simple as the credit card became more practical. If more and more people’s “card” is actually their smartphone, then flashing an approval code on their phone from a point-of-sale lender isn’t much of a stretch.
4. Helped along by fintech-enabled online marketplace lenders, the attraction of what had been a less-popular form of consumer credit grew. Personal loans, often obtained to consolidate credit card debt at lower rates, have become respectable again, and so loans, rather than credit card charges, have become an acceptable option for payment.

“Point-of-sale finance is a new application of an old idea,” says TransUnion’s Siegfried. “And you’re going to see, at the point-of-sale, more traditional lenders come up with competitive offerings.” One difference from some “classic” programs is that the credits are not collateralized with the purchase.

Third-party companies that offer POS finance market as hard to merchants to accept these programs as to consumers. They emphasize that greater sales will result, and some, in their marketing, specifically point to the fact that the merchant will receive 100% of the sale price, even though it is being financed. Contrast this with the bite that credit card programs typically take, especially from smaller sellers who don’t have the negotiating muscle of major retailers.

In a late 2018 study, Citizens Financial Group found that 76% of consumers surveyed said that they are more likely to make a retail purchase if a payment plan backed by a “simple and seamless point-of-sale experience” is available. Interestingly, the study found that for two-thirds of the consumers, the desire for credit cards is satiated — they want more credit, but they don’t want more credit cards.

“The bottom line is that consumers want a simple and easy experience when they make a large purchase, and we believe that this research shows that retail brands can modernize their payment model by moving away from the co-brand/store credit approach of the past,” Citizens Financial said in a report on the study.

“We’ve seen this first-hand as the financing partner for well-known technology brands and believe there is tremendous opportunity in this space.” One such effort by Citizens is offering payment plans for iPhones upgraded in Apple Stores. In a blog the banking company notes that its portfolio of what it calls merchant-financing loans has grown to over $1 billion in four years.

The Filene Research Institute estimated several years ago that the total POS finance market stands at roughly $391 billion in the U.S.

What are some Selections of Point-of-sale Programs?

The Citizens survey found that a major appeal to consumers of these programs is certainty. TransUnion’s Siegfried notes that in some other countries credit card balances can be paid on installment plans, on request, but in the U.S. that’s not been the case.

The bank’s survey indicates that three out of five consumers like fixed monthly plans with clear payment terms. That is an earmark of the point-of-sale programs. At some point, the consumer selects the term of the loan they are requesting and the periodic payments follow from that.

Here is a small sampling of what’s being offered, or coming, by a wide variety of providers:

• JPMorgan Chase will introduce My Chase Plan in later 2019. The company indicated in an investor presentation that there is $250 billion in outstandings not held by Chase that its own consumers have racked up on other issuer’s cards. The new service will allow Chase cardholders to choose among past card purchases of $500 or more and to finance them for longer periods for a fee, rather than paying interest. There will also be a feature added to the Chase card app that will enable selected creditworthy consumers to slice off a portion of their card’s approved credit line and treat it as a personal loan for larger purchases. Interest charges would apply to those transactions.

Chase will also adopt features similar to the “Pay It, Plan It” program launched by American Express in 2017. Amex offers certain cardholders the ability to use its card app to choose to either leave a charge in the current card balance, or to spin it out as an installment loan. Consumers pick the term right on the app.

• Mastercard announced the acquisition of Vyze in April 2019. Vyze is a point-of-sale technology platform that allows merchants to offer a selection of different lenders’ credit programs. Vyze works in both store and online environments. Mastercard is promoting the acquisition as benefiting both its lenders and its merchants.

• Square offers Square Installments. Consumers can apply in store or at home on their smart phones, and choose their preferred payment plan. The program was launched in late 2018.

• Amazon, whose store card is provided through Synchrony Bank, offers the ability to use the card as a “buy now, pay over time” vehicle. Consumers can choose to pay over six, 12, or 24 months.

• Synchrony is also piloting a point of sale approach called SetPay.

• Walmart offers consumers the ability to pay over time on both store and website purchases using Affirm. Affirm is one of the dominant players in point-of-sale.

• IKEA the assemble-yourself furniture chain from Scandinavia, offers two cards to consumers. One of these is the IKEA Projekt card, which offers payment plans for six, 12, or 24 months. The card is backed by Comenity Capital Bank, a U.S. direct bank that provides credit programs for retailers.

Numerous other providers are in, or entering this space. Among them are Klarna, Bread, Blispay, and Acima.

How do you Finance Online Purchases?

Point-of-sale financing is like financing your purchase with a small loan. Instead of paying for a given product with a lump sum, you’ll make smaller monthly installment payments. Point-of-sale financing options are typically found next to the online cart or checkout page of an online vendor. To take advantage of this payment option, just submit a small application with some personal information.

Check out the following third-party financing companies and financial institutions offering point-of-sale loans:

SuperMoney

SuperMoney’s turn-key financing solution provides point-of-sale financing for online vendors in all industries such as retail or home improvement. It’s the only point-of-sale financing platform that lets buyers comparison shop to find the best deal. How does it work?

Just submit a quick application to receive a list of pre-approved, personalized loan offers from top lenders. Different loans come with different rates, fees and requirements, so be sure to also check out what the best personal loans are to ensure that you choose the best option for you.

Affirm

Affirm is a San Francisco-based company partnered with modern retailers like Wayfair, Casper, Best Buy, and Expedia. They offer loan terms of 3, 6, or 12 months, and their mobile app allows for easy financing and convenient monthly payments for big ticket items.

Klarna

Klarna is a Swedish company partnered with Lenovo and Overstock.com. It offers two different financing solutions:

• An interest-free installment loan with loan terms spanning from 2 weeks to 1 month.
• A credit line starting at 6 months.

Greensky

Greensky partners with nearly 17,000 active merchants to provide deferred-interest loans at the point of purchase. That means that GreenSky’s loans are interest-free for the length of the promotional period (six to 18 months). However, if you fail to pay the loan off within that period, you’ll owe retroactive interest on the original total cost.

Hybrid option: Online credit accounts

There are also a few contenders who got into the point-of-sale financing space early and who now provide their point-of-sale financing via online credit accounts. Amazon and PayPal are the two major players here.

Amazon

Getting an Amazon Store Card provides you access to 6, 12, and 24-month financing options. And as long as you pay off the purchase in full within the offer period, your purchase is totally interest-free. Once the offer period passes, though, you’ll have to pay interest on any remaining balance.

When using Amazon Credit to purchase qualifying electronics that cost $499 or more, your balance is interest-free for a year. That means that if you pay it off within a year, your purchase is fully interest-free.

PayPal

PayPal Credit is a credit line tied to your PayPal account. But unlike a regular credit card, the application for PayPal credit is incredibly simple. If you’re a current PayPal user applying for PayPal Credit, simply provide your birthday, your income (after taxes), and the last four digits of your Social Security number. You’ll find out in seconds if you’re approved!

They will run a credit check, but their requirements are lower than the average credit card. Plus, you can pay off your balances right from your PayPal account. And you can use PayPal Credit everywhere that PayPal is accepted.

With PayPal Credit, you’ll pay no interest on purchases of $99 or more as long as you pay them off in full within 6 months. And this isn’t an introductory offer — it’s permanent! Of course, you’ll still have to make minimum monthly payments. And for the rest of your balance, PayPal Credit charges 25.99% APR.

Point-of-sale financing is definitely convenient. It doesn’t require you to have a credit card, and typically has lower eligibility requirements than the average credit account. However, all that flexibility and convenience comes at a cost. The interest rates of point-of-sale financing options are much higher than average — often 25-30%. And although many charge no interest for an introductory period, those interest rates skyrocket after the promotional period ends.

What do Banks Charge for POS?

If you regularly use credit cards for shopping, the chances are that every once in a while, you have been asked to shell out an extra 1% or even 2% at POS (Point of Sale) counters for using your card. Before even getting into the details of why merchants do this, what you need to know is that this practice is definitely wrong and that there are RBI regulations that allow penalising such merchants by blacklisting them.

How does it work?

When you swipe your card on a POS machine, the merchant has to pay a small percentage (about 2%) as rental fees to the bank for using the POS machine. Ideally, these charges are to be borne by the merchant as a part of the cost of running the business, and in particular, for having the convenience of taking payments through a POS. But some merchants try to recover this charge from customers.

In the RBI’s own words: “…merchant establishments levy fee as a percentage of transaction value as charges on customers who are making payments for purchase of goods and services through cards. Such fees are not justifiable and are not permissible as per the bilateral agreement between the acquiring bank and the merchants…”

RBI adds that any such instance can be used as a strong argument by the bank to terminate its POS-linked relationship with such merchants.

Why are merchants wrong to charge that extra amount from customers?

Nowadays, with the proliferation of PoS machines and ATMs, people do not generally carry a large  amount of cash when they go shopping. In this scenario, it works to a merchant’s advantage to have a PoS machine installed. When a shop lets their customers  pay using cards, it sells more than what it would have with only cash purchases.

Technically, merchants can accept cheques, but they hardly do, because of the fear of these cheques being dishonored. So, even if we were to keep RBI regulations aside for a moment, common sense says that having a PoS machine is in the best interest of the merchant. When a customer uses credit cards or debit cards, the merchant is assured of getting his money immediately after the transaction is approved.

Therefore, in an ideal scenario, it is clear why the merchant should not be charging customers for using the PoS machine. However, we do not live in an ideal world. There are cases when a merchant tries to pass on the 2% expenditure onto the customer, even at the risk of getting the business blacklisted by the bank.

What would you do if you have to buy something urgently and do not have cash in your account to withdraw from a nearby ATM? Chances are that you would give in to the merchant’s demand for a 2% fee for using your card. The best option for you in such a situation would be to tell the merchant that you are aware of RBI’s regulations and can make a complaint with the bank to get the merchant blacklisted.

If the merchant is ready to reduce the charges, then you might be willing to pay a small fee to go ahead with the transaction. In most cases, this would work, as the extra charge would be shared by you and the merchant. However, if the merchant is already earning a high margin and still charging you for a card payment, it is only right for you to refuse to pay the extra amount.

The next time a merchant asks you to shell out that 1% or 2% extra for card payments, rest assured that you can tell the merchant that you are well-aware about the RBI’s notification on Credit Card transactions at POS’and will not be taken for a ride.

How long does a POS Transaction take?

Credit card processing is an essential element of today’s retail world, especially when a business is running an e-commerce website. In order to process credit card payments effectively, merchant accounts are used to complete this process.

The time that it takes for a merchant who accepts a credit card as payment until the time the funds are deposited into the merchant’s bank account can vary depending on the type of merchant account the business owner uses. Typically, payment can take anywhere from 24 hours up to three days to process the payment. The reason for this time is because the transaction process goes through a number of steps to get from one bank account to another.

To better understand credit card processing, it is important to know all the steps that take place from the point of sale to the final deposit into the merchant accounts. Once a credit card is used at the point of sale in any business, the payment is then authorized through the acquiring bank. The acquiring bank is the bank where the merchant has an account.

Read Also: Payment Organisations

The acquiring bank will then issue an authorization request to the card-issuing bank. Once authorization is confirmed, the approval code is sent back to the point of sale. For most transactions, this happens within seconds so the payment can be taken for goods and services.

After an approved payment, a similar process happens once again, although instead of requesting authorization through the merchant’s bank to the card issuing bank, the authorization code and draft of sales are sent first the acquiring bank, then to the card issuing bank. Many merchants will provide daily or weekly batches of sales instead of completing one transaction at a time.

Once the card-issuing bank receives the authorization code, the card-issuing bank will subtract an interchange fee from the total owed. It is then sent back to the acquiring bank where the money is then deposited into the merchant’s account, minus a previously agreed-upon discount percentage that is a requirement of having that type of account. While it may seem like a complicated process, it can be very efficient for collecting numerous credit card payments for any business, big or small.