Given the financial uncertainty created by the coronavirus pandemic, it’s understandable that many consumers will make a dramatic shift in behavior with their personal finances. A recent study by Statista shows that 69% of the 800 consumers surveyed had $1,000 or less in their savings. One would hope that the COVID crisis has brought top of mind the importance of savings, and customers will now start working towards creating a more substantial emergency fund.
As such, we expect consumers to manage their expenses better going forward. This creates an excellent opportunity for you and your company to double down on promoting and offering consumer finance options.
As you increase your consumer finance offers, be prepared for more declines. With the unemployment surge created by the virus, you should also expect to see your approval rate (percentage of customers approved) drop below your traditional rate. While we have no confirmed information (as of publishing in June) from the banks that they have or plan to tighten their credit criteria/decision, history and logic will tell us that as losses and delinquencies increase, the banks must react. Their typical reaction is to not approve some of the less credit worthy customers that they may have approved in the past. It is critical that you be prepared for this.
One option is to Implement, if you haven’t already, and offer a second-tier finance or LTO (Lease To Own) solution that will allow those customers to complete the sale. We know that nearly 60% of appliance sales come from duress. We also know that 69% of customers don’t have cash on hand. It’s imperative that you’re able to offer financing solutions to serve these customers.
Another piece to consider in the post-COVID world is your new responsibility to help keep your customers and employees safe. While this often starts with the PPE (Personal Protective Equipment) you have available in your store and for home deliveries, it always ends with the close of the sale. Whether that be via credit card, consumer finance or LTO, we anticipate a change in consumer behavior and their willingness to touch or use any items that are frequently used by others. Do your credit card terminals offer touchless payments? Can your customers apply for consumer finance on their own mobile device using Text to Apply or online applications? Offering these solutions not only creates a safer, better experience for your customers, but we regularly see an increase in credit penetration when these types of options are presented.
Chris Kirk is vice president of member and financial services for Nationwide Marketing Group