The point of sales space is constantly advancing in the face of new technology and new payment options. As a recent CB Insights article advocates that Point-Of-Sale lending is picking up momentum as millennials shun credit cards. It states that millennials really struggle with credit cards, with recent studies indicating that 3 in 5 millennials carry credit card balances month to month, yet 45% don’t know the interest rate on their card. As a result, startups are reinventing lending at the point-of-sale, and POS lenders are partnering with merchants to provide shoppers, both in-store and online, access to capital.
Traditionally, banks hold the lead when it comes to financing options due to their abundance of cash, which would make it safe to assume that banks are best placed to provide point of sale financing. Unfortunately, this is not the case and they are way behind in advanced mobile-first POS financing. The easiest solution for banks is to partner with fintech experts; while these partnerships are finally starting to take form, knowing how to achieve success could be a challenge.
A previous Forbes article claims that just over half (53%) of the C-level executives at mid-size banks and credit unions ($500m to $50b assets) surveyed for Cornerstone Advisors’ annual What’s Going On in Banking study said that fintech partnerships will be important in 2019.
One reason for this hype surrounding fintech partnerships is attributed to culture change fantasies. However, the article is not entirely optimistic this will bring about the change they hope. Ron Shevlin, the managing director of fintech research at Cornerstone Advisors and the author of the article, states”One of the more ridiculous rationales for partnering I’ve heard is that bankers are looking to fintech startups to help change the culture of the bank, and infuse a more “innovative” culture into the institution.”
“You know why startups have a more “innovative” culture than banks? Because they have no customers to take care of. If the culture of a bank can be changed by a fintech partnership, there’s a lot more wrong with the bank than just a stodgy culture.”
But there are some that contend this belief and advocate that banks are gaining momentum thanks to fintech partnerships. In a recent article in The Paypers, Nufar Segal Barekt, GM Consumer Financing at Jifiti, a startup redefining retail experiences with unparalleled data & technology consumer financing, states “Banks still hold the title as the biggest lenders around, but they simply do not have the technology to bring their loan programs to a retailer’s POS with the digital user experience that shoppers expect today. These partnerships allow a bank to be at the POS by utilising fintechs as technology enablers between their funds and the retailer’s systems. It can also help banks prioritise an advanced mobile-first POS financing approach.”
She adds: “Banks are awakening to the idea that fintech disruption poses less as a threat, and rather as potential end-to-end solution. In 2018, Mercantille Bank of Michigan joined forces with Orlando-based fintech startup Abe.ai to improve the financial health of the bank’s customers and drive higher customer engagement. At Jifiti, we partnered with Mastercard to implement a consumer financing platform to customers.”
We can’t be sure of what partnerships will emerge in 2019 or who will dominate the POS space, however, we can be certain that as fintech startups continue to innovate we can expect to see some big changes when it comes to the checkout.
Disclosure: This article includes a client of an Espacio portfolio company