Subprime credit consumers’ options grow as more retailers go digital

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In the shift to online and mobile shopping, one group often left out is the 65 million Americans with poor or no credit. But as more retail categories like furniture move online, a growing number of e-commerce merchants is adding instant finance options for the subprime crowd.

The shift is giving merchants the opportunity to test the placement of checkout buttons to see which of their expanding options get the best results.

Ghostbed, which sells memory-foam mattresses online, recently added two new alternative financing buttons to its website to accommodate the growing number of consumers starved for credit.

“Our whole concept is based on immediate purchase and delivery of a bed, and about half of our audience has no credit, so we needed a channel for those customers alongside the traditional payment choices,” said Marc Werner, CEO of Plantation, Fla.-based mattress manufacturer Nature’s Sleep, Ghostbed’s parent company.

One solution emerged from Zibby, a New York-based lease-to-own company specializing in loaning money to consumers with low or no credit for furniture, electronics and appliance purchases.

Ghostbed promotes Zibby in a prominent corner of its main landing page, touting the option to buy with no credit required, and after piloting the service last fall it’s become a permanent option that’s driving “strong results” for beds that cost about $500 to $1,000, Werner said.

Consumers opting to pay with Zibby enter their mobile phone number and provide details including their address, Social Security number and estimated income. Most are immediately approved to borrow up to Zibby’s limit of $3,500 per individual per month, according to the New York-based lender, which shoulders a short-term loan consumers can pay off in installments or sooner.

Zibby skips FICO scores, running a quick scan of prospects’ identities and location using data-verification tools from LexisNexis, IDology and FactorTrust instead, said Zac Prince, Zibby’s senior vice president of sales and marketing.

“We triangulate data from a variety of sources and process it with machine learning to get an instant credit decision,” Prince explained, noting that most new customers are approved within 30 seconds. Zibby, owned by Cognizant, received $150 million in financing in February from Victory Park Capital.

Around the same time Ghostbed added Zibby to its checkout menu, the company identified another segment of consumers seeking alternative finance options, and in February Ghostbed added Klarna, which targets consumers with solid credit who nevertheless want to pay in installments.

Sweden-based Klarna asks consumers to only enter a mobile phone number or an email address to be approved. In addition to Zibby and Klarna, Ghostbed’s payment choices include Pay with Amazon, PayPal and major credit and debit cards.

Affirm and Bread are two other online-financing companies serving e-commerce merchants with a range of financing options for consumers at all income levels. Zibby and Klarna recently have each notched new deals to expand their respective niches on e-commerce sites.

Klarna, launched in Europe in 2005 and in the U.S. in 2015, has long been a checkout option at, but this week it announced an integration with Shopify giving Shopify’s website customers in nine countries to the option to add Klarna.

Zibby last month was added as a payment option to the Vyze lending platform, further expanding its reach. Vyze offers merchants integrating with its platform a range of financing choices that recently began reaching a broader range of consumers, from prime to subprime, said Keith Nealon, Vyze’s CEO.

“The subprime arena is a huge area of unmet opportunity, and for many of the fastest-growing e-commerce merchants, we forecast that can capture an average of $10 million more in revenues by providing alternative financing options,” Nealon said. “Just as retail is evolving into an omnichannel concept, so is alternative financing.”

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