How POS financing kept small shops afloat during the COVID-19 pandemic

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The COVID-19 pandemic was a cascade of crises for Benjamin Thayil. The Miami optometrist has just a single location — and he didn't want to lose patients due to virus fears or because their finances could no longer absorb the expense of a doctor's visit.

The latter concern was within his power to address. Thayil needed to demonstrate to patients that they would be able to afford every aspect of treatment, even if it meant using credit.

“Whenever we go into a conversation it’s not a matter of whether the person is not able to afford something. It’s more about unexpected costs,” Thayil said. “That’s where the plan comes from.”

Thayil’s practice uses a point of sale credit service, turning to an alternative form of financing for consumers who may be wary of large credit card bills or shocked at the idea of paying for an entire eye treatment all at once.

Benjamin Thayil, a Miami optometrist who offers point of sale credit to help patients cover expenses during the pandemic.

For years Thayil worked out payment plans directly with patients, but in the past year turned to a point of sale credit provider to offer more visibility into payment plans while providing a fast decision. A more formal approval process also opens the possibility of offering alternative plans to new patients.

“We didn’t have an algorithm before,” the doctor said. “It was more of a case of how long the person was a patient and how well we know them.”

Thayil uses Sunbit, a Los Angeles-based point of sale lender that scans borrowers’ driver's licenses to offer a decision at the point of sale in about 30 seconds. The consumers opt in to the soft credit checks, which are accessed by a drivers license scan. Sunbit pours the data into an AI analytics engine to produce terms. An integration with the merchant personalizes the experience.

Sunbit competes in an expanding market for point of sale credit companies, including Affirm, Klarna and Splitit. These firms are reporting high growth in 2020, due to the coronavirus and its economic fallout, which caused many consumers to consider new options for financing larger purchases.

Shoppers who use point of sale credit are still accumulating debt, but compared to credit cards, the terms are simple, finite and for a specific purchase.

The challenge for point of sale lending is to come up with terms that allow at least 90% of approvals without charging “predatory rates,” or an APR above 36%, said Arad Levertov, Sunbit’s founder.

It has to be a high approval rate, or else it’s a humiliating experience for both the merchant and the consumer,” Levertov said, adding he got the idea for Sunbit when suffering an experience like that at a store about 12 years ago. “After answering questions in a shopping line with my kids about where I lived and how much money I made, I got turned down anyway with a line of shoppers behind me.”

One of the more concerning trends tied to the pandemic is that people began avoiding medical care unrelated to COVID-19. There are several reasons for this, including fear of contracting the virus by going to a medical facility. But there are also economic concerns related to the weakened economy, and uncertainty over consumer responsibility for payments due to changes in health insurance.

Flexible financing offers some help, according to Thayil.

“At least we have more wiggle room to keep people seeing well and keep functioning, if the payments can be broken out into what’s manageable in a time of uncertainty,” Thayil said, adding he's been able to maintain patient levels during the crisis.

Increasing the average purchase size also relies on financing, said Ricardo Hueso, general manager of Del Amo Motorsports, a five-store chain in the Los Angeles area that sells jet skis, motorbikes, off-road vehicles and accessories.

The store’s products range from a 50-cent bolt to larger purchases of several thousand dollars for vehicles and high-end equipment. There are often surprise expenses, Hueso said, noting certain helmets often cost more than the consumer thinks.

The average invoice for a consumer that uses point of sale credit is $297, as opposed to $103 for other invoices, Hueso said. He estimates the stores have done about $40,000 in additional sales in 2020 through point of sale credit.

“It’s gotten to a point where most consumers expect some sort of [alternative] payment option,” said Hueso, who also uses Sunbit.

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