The numbers also show higher-income consumers are using more credit in order to hold onto cash
MECHANICSBURG, Penn. — Data from credit aggregation and customer acquisition specialist Versatile Credit shows that consumers’ use of promotional financing is on the rise, a signal that a wide mix of consumers want to borrow versus use their own cash in uncertain times.
Based on its data analysis, in-store financing programs had a 10% rise in unique applicants and a 26% rise in approved financing in January compared to January 2022. The January volume of in-store applications also rose 8% from December 2022, and the total approved financing also rose 9.6% from December.
Versatile said the data analysis is supported by recent sales and financing activity from more than 1,400 merchants across the U.S., some 70% of which are furniture and bedding retailers.
It provides these retailers — ranging from large nationally known dealers to regional multi-store chains and smaller mom-and-pop stores — access to a network of some 35 providers including prime, near-prime and no-credit-needed providers. This means that the stores and their customers have a wide range of financing options to help get products into consumers’ homes across the country.
Other findings in Versatile’s analysis are:
+ Prime and no-credit-needed providers showed the most growth with prime approved applications increasing by 8% in January from January 2022. Average approved financing rose 18% during the same period.
+ No-credit-needed applications rose 37% in January, while average approved financing rose 6% the same month, year over year.
+ Near-prime lenders saw a 14% increase in applications but had a slight drop in approvals.
Home News Now recently spoke with Versatile Credit’s President and Chief Operating Officer Vicki Turjan to see what the numbers mean for retailers and consumers around the country. From her perspective it points to strong ongoing demand in the marketplace as evidenced by a rebound in furniture retail sales in January and the desire for consumers to hang on to their own cash.
“People are still buying — they are still out there and shopping for goods and buying goods,” she said, noting that many customers making more than $100,000 a year are in the market for financing options. “When you see the approvals are up, it’s a pretty strong customer that’s applying for credit because they are getting approved at the primary and tertiary levels. Clients with good FICO scores want to use your money, so you need to have programs that meet their needs because they are still shopping and they are out there and willing to buy.”
She said the numbers also speak to uncertainties with the economy and the impact that is having on a wide swath of consumers and income levels.
“Things are tough and people are living paycheck to paycheck, so those promotional financing offers are critical,” she said. “Even if you do have cash, you may want to hold onto it for a rainy day,” she said. “So if someone is going to give you 12 months same as cash, I will use that all day long and not use my own money.”
She noted that having a diverse menu of financing offerings even in the subprime realm shouldn’t be viewed as a negative for the store or their customers as today’s borrower falling in the subprime or tertiary lending market could very well be a prime customer in the future.
“People work their way up,” she said. “So it is critical to have that full stack (of financing options).”
She also noted that retailers can be proactive by helping the consumer understand their financing options and spending limits based on how much money is available to them and how much they will have to spend each month.
“Consumer finance should not be an afterthought,” she said, noting that it is a tool that can either drive the sale or save the sale. “We are a big believer that if you put it in front of product selection, they are going to spend more and you will get a satisfied customer.”
“That customer,” she added, “is working with a known budget. They know exactly how much they can spend. You want it to be an efficient and effective product selection process. … The people (retailers) who are doing it right are being successful and using it as a tool to drive revenue and making sure that consumer has access to whatever it is they want to buy when they are in that store. It becomes obtainable to them because they can manage the monthly payment.”