With BNPL on the rise and credit scores falling from prime levels, merchants must weigh the pros and cons of single lender solutions verse multiple lender solutions. Single lender solutions tend to cater to customers who are already in a good credit position. Whereas multiple lender solutions cover the full credit spectrum.
Single-Lender Solution
From 2019 to 2021, the BNPL industry saw unprecedented growth. Loan originations jumped from 16.8 million to 180 million, pushing many merchants to add a BNPL single-lender solution to their checkout page. These kinds of single-lender solutions are a great option for customers with a credit range of 690+. Single lender solutions are often seen as a low-risk offer. Because they attract creditworthy customers who pose little to no repayment issues. According to Experian.com, the average credit score in the United States is 714. A single lender solution can help support this segment of the population.
Multi-Lender Solution
Given the state of the American economy, more merchants understand the importance of working with near prime and subprime lenders. Multiple lenders allow merchants to cast a much wider net, so they can convert the business already coming to their webstore. Without a full credit spectrum solution, merchants risk losing customers to cart abandonment or worse, a competitor.
Multiple lenders can also support different ticket sizes and SKU’s. Oftentimes, in economic downturns, industries like jewelry can see a significant decrease in lender approvals. Multiple options give customers and merchants an opportunity to close a sale or possibly increase their ticket size.
Disadvantages of a Single-Lender Solution in consumer financing
Lenders will not give merchants insights into their own limitations. For example, most lenders will never tell a merchant how many customers they denied. Merchants spend a lot of money and resources attracting customers to their checkout page. If a customer arrives at the shopping cart, and is denied by the lender, then that lender cost the merchant money.
Single lender solutions tend to market their own brand on the merchant’s website. Consequently, the lender can pull the customer off the merchant’s website, drawing them away from the product page. Conversions happen at the product page, not the checkout. If a customer’s shopping experience is disrupted by the lender’s application, then the lender cost the merchant money.
Confusing BNPL checkout pages with multiple Single-Lender options
Congested checkout pages are confusing for customers. The average customer does not the know the difference between one lender from another. If they are presented with a hodgepodge of brands at the checkout page, most customers have no way of knowing which lender works for their specific lifestyle and needs.
For instance, a credit card and a BNPL option are quite different. If a near-prime customer was denied by a prime lending option, then the customer may blame the merchant for their poor experience. According to PYMNTS.com, 90% of customers say a smooth checkout process will determine if they return to a webstore or not.
Merchants have no idea how many financing sales they are losing at the checkout page everyday. However, the right payment technology can help merchants combat cart abandonment and increase conversion.
Advantages of BNPL Multi-lender Payment Gateways
The decision to offer one lender versus several lenders may with the rise of new payment technologies emerging in the Fintech industry. In the next 12-18 months, more and more lenders will be joining multiple lender platforms, like WeGetFinancing.
Multi-lender platforms take out the friction in both the single lender scenario and the multiple lender scenario. Since the lenders they work with cover the full-credit spectrum, merchants do not need to worry about customer denials and cart abandonment. With a full-suite of lenders, customers are far more likely to find a lender that is a perfect match.
Multiple lender platforms also have a single point of entry application. For example, WeGetFinancing is a single application, multiple lender solution that only presents the lending options for which the customer is already eligible. Customers do not need to select from a plethora of brands at the checkout page. They can apply with one button, and WeGetFinancing will scrub their information against the underwriting criteria of the lenders working with them.
The right BNPL payment gateway for the best Consumer Experience
Merchants need to have a diverse product range to stay competitive. Consumer financing is quite similar. Customers are used to options, and per PMNTS.com 73% of customers will never return to a webstore if they had a bad checkout experience.
Single lender solutions and multiple lender solutions both pose unique advantages and challenges. However, with the right BNPL payment gateway, merchants can give their customers a superior customer experience. These kinds of technologies will not only provide a customer with more options, but they will also help turn them into lifetime customers.
