This study reviews current consumer borrowing behaviors; strategic positioning initiatives by financial technology companies (fintechs), banks, card issuers and card networks; and the cross-border roll-out of those initiatives across product categories and commerce platforms. It also analyzes each of the principal business models in the industry, examining the potential viability of each model as more players join and bring their own marketing messages, merchant partnerships, revenue models, and targeted consumer cohorts. It provides a complete industry context for POS installment lending, an assessment of the strategies and success of extant and new participants in the sector, and a detailed analysis of the opportunities and challenges to those entering or competing in this fintech sector.

Why POS Installment Lending?

Creating a Role as Shoppers’ Preferred Partners

POS installment finance provides consumers with a convenient way to pay-over-time for digital and in-store purchases at interest rates that are either 0% or lower than those of credit cards. Fintechs are also natively masterful at communicating with their customers via mobile apps, texts, and instant credit approvals. They have stripped away the paperwork and the “no’s” of traditional retail lending.

Meeting Merchant Needs to Remove Purchase and Payment Friction

POS installment finance gives merchants a new way to close sales by removing payment friction that can lead to shopping cart abandonment, to make purchasing more affordable for their customers, and to create repeat customers whose purchase amounts are higher than is characteristic for those without installment financing.

Pressuring Traditional Consumer Credit Players into Innovation Mindsets

For traditional finance companies and banks, POS finance requires adopting a next-gen mindset of innovation. Competing with fintechs for installment lending market share and retention of their customer relationships forces lenders reliant on decades of consistent income from their credit card units to rethink consumer credit business models.

International POS Installment Credit Models Suggest New Markets, Strategies

While “POS installment” lending is a term used globally, the actual product, as it is experienced with individual nations or geopolitical territories, reflects that area’s specific characteristics. Each market’s solutions are customized to reflect its consumers’ household wealth, their experiences with consumer credit, their preferences for specific methods of payments, and that population’s level of adoption and use of Internet and mobile commerce.

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Table Of Contents

  • Executive Summary
    • Scope & Methodology
      • Scope of Report
      • Report Methodology
    • Market Trends
      • Why Is POS Installment Lending So Hot?
      • 2021 as Year of -10% Retrenchment
      • Robust 15% CAGR Nonetheless Projected for 2020-2025
        • Table U.S. Point-of-Sales Installment Financing Market: Estimated CAGR for 2015-2020 vs. 2020-2025 (percent)
        • Table U.S. POS Installment Financing Market, 2020-2025, CAGR (billion dollars and percent growth)
    • Trends and Opportunities
      • Banks
      • Merchants
      • Fintechs
      • Robust and Frictionless Digital Strategy Is Essential
      • Responsible Lending in Coronavirus-Altered Economy
      • Diverse Strategies Based on Credit Segmentation
  • Market Growth Opportunities
    • Strategic Considerations for Market Participants
      • Banks
      • Merchants
      • Fintechs
    • Robust and Frictionless Digital Strategy Is Essential
      • Consumers Research and Shop Via Mobile, Even if They Buy In-Store
        • Table Mobile Becoming Lead Channel for E-commerce in the U.S., 2018-2021 (percent)
      • Emphasis on Responsible Lending
      • Diverse Strategies Based on Credit Segmentation
    • Accelerating POS Finance Growth
      • Current Pandemic Will Fuel Growth of POS Installment Lending
  • U.S. Industry Context
    • The Consumer Credit Market Before POS Installment Finance
      • Finance Companies and Credit Card/Store Card Lines of Credit
    • The Opportunity That Created POS Finance
      • POS Installment Loans Turned Small Dollar Consumer Finance on Its Head
      • Consumers' Receptive to New Ways to Buying and Paying for Purchases
    • The Backstory of POS Financing
      • E-Commerce Growth Fueled Merchant Appetite for Competitive Advantages
      • POS Financing Downstreamed in E-Commerce to Larger Market
  • POS Financing in the U.S.
    • Forecasting Industry Growth
      • 2021 as Year of -10% Retrenchment
      • Robust 15% CAGR Nonetheless Projected for 2020-2025
        • Table U.S. Point-of-Sales Installment Financing Market: Estimated CAGR for 2015-2020 vs. 2020-2025 (percent)
        • Table U.S. POS Installment Financing Market, 2020-2025, CAGR (billion dollars and percent growth)
      • Summary of Rationale for Longer-Term 2020-2025 Projections
      • Afterpay Seizing Market in Australia, U.S., and U.K.
        • Table Afterpay Estimates of Opportunity for POS Installment Lending in Australia, U.S., and U.K., 2019 (billion dollars)
    • Key Growth Drivers
      • New Market Niches, New Player Strategies All Contribute to Growth
      • Consumers Receptive to POS Loans
      • Fintechs Leverage Consumer Payments to Build Customer Relationships
      • New Strategies from Traditional Financial Institutions
    • Key Competitive Challenges
      • Challenges Dictated by Player's Role in Payment Transaction
      • New Types of Payment Friction
      • Regulatory Oversight: POS Lenders Business Models Invite Scrutiny
      • Competition Pressures Prices
  • The U.S. POS Financing Consumer
    • Packaged Facts Survey Findings
      • Key Cohorts Include African-Americans, Parents, and College Students
        • Table Online POS Installment Loans: Customer Demographics (percent who use and percent of total customers)
      • Frequency of Online POS Loan Usage
      • POS Loan Pay-Off Periods
      • POS Loans by Amount Borrowed
      • Defining Characteristics of POS Loans
      • Interest Rates for POS Loans
      • Frequency of POS Loan Use
      • Number of POS Providers Used
      • PayPal Credit Is Most Used POS Loan Provider
      • Men Request More Credit than Women
      • Uses of POS Installment Move from Large Ticket to Smaller Ticket Items
      • Consumers Avoid New Credit Card Accounts
  • The U.S. POS Financing Merchant
    • Significant Benefits to Merchants
      • Consumers Demanding Product
      • Airlines
      • Fintechs
  • U.S. Dynamics: Traditional Players
    • U.S. Banks and Card Issuers Join POS Finance Market
      • U.S. Banks
      • Bank: Citizens Financial
      • Consortium: GreenSky Financial
      • Card Issuer: Citibank
      • Card Issuer: JPMorgan Chase
      • Finance Company: Synchrony Financial
    • Card Networks Enter POS Finance Market
      • Snapshot
      • Visa
      • American Express
      • Mastercard
  • U.S. Dynamics: Fintechs
    • International Fintechs Drive Innovation in U.S. POS Finance
      • Fintechs Targeting Consumers With/Without Credit
        • Table Fintech Volumes, Lead Products, and Repayment Methods
      • Klarna
      • PayPal Credit
      • myGini
      • Square Installments
      • Affirm
      • Afterpay
        • Table Year-Over-Year Growth of Afterpay's Business
      • Sezzle
  • International Market Dynamics
    • Global Snapshot
      • Overview
      • European Union
      • Latin America
      • China
    • Western Europe
      • National Debt and Payment Preferences
    • Brazil
      • Largest Latin American Marketplace
    • Mexico
      • Mexico's E-Commerce Value More than Doubled Between 2014 and 2019
    • China
      • China's High Level of M-commerce
      • Tencent
      • Alibaba