The study, Understanding the
BNPL and POS financing emerged as a popular offering among younger consumers, with Gen Z and younger Millennials (ages 18-30) making up the largest population distribution of consumers who applied for POS financing during the study period (32%). Bridge Millennials (ages 31-40) and younger Gen X (ages 41-50) were also more likely to favor BNPL/POS with 78% of all POS financing applicants falling between the ages of 18-50.
BNPL and POS offerings did not appear to have a major impact on a consumer’s usage of other forms of credit. In fact, the BNPL/POS applicants generally used other forms of credit more than the rest of the population.
“Consumers who may utilize point-of-sale financing are not doing so at the expense of traditional credit. We saw consumers who have applied for POS financing building balances on bank and retail cards, and applying for new credit at higher levels than the general credit population. These new forms of financing are growing the credit pie – opening up more opportunities for both consumers and lenders,” said
The ease of application and predictable payment plans allow consumers to spread smaller payments over a period of time to afford larger ticket items. A
Consumers who apply for POS financing are an attractive segment for acquisition growth
The study looked at the credit profiles of over 6 million POS financing applicants (defined as consumers with an inquiry on the
The findings showed that POS financing applicants have more credit products, such as credit cards, retail cards and installment loans in their wallet compared to the general credit active population. Credit cards were most popular among POS financing applicants (89%), followed by retail cards (75%) and auto loans (73%).
POS financing applicants also were more likely to have a greater number of cards in their wallet in comparison to the general credit active population. Card utilization levels, however, were very similar across risk tiers, with most consumers having open-to-buy available on their cards. This suggests that consumers are actively seeking POS financing even when they could have put the purchase on a card.
Consumers applying for POS financing are also more likely to build or maintain credit card balances in the months following their inquiry than the general credit active population – debunking the assumption that BNPL/POS are driving card balances down.
Bankcard | Retail card | |||||||
Percentage | POS financing applicants | General credit active population | POS financing applicants | General credit active population | ||||
Increasing balances | 46% | 40% | 36% | 28% | ||||
Decreasing balances | 54% | 60% | 64% | 72% |
Consumers that utilize BNPL/POS financing, however, still perform well and are on par with the general credit active population when it comes to delinquency. The study found that while POS financing applicants perform slightly worse on credit cards, they outperformed the non-POS segment on unsecured personal loans. The healthy rates of delinquency demonstrated by POS financing applicants makes these consumers an attractive segment to target for acquisition growth.
“While more and more consumers are participating in POS financing, these consumers are still demonstrating healthy rates of delinquency on traditional products and are highly engaged in the credit market,” said Pagel. “This highlights an opportunity for both traditional and POS lenders to provide more diverse credit solutions to this attractive segment.”
For more information on TransUnion’s study, please download the insight guide Understanding the
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