Walmart Offers Point-of-Sale Loan at Supercenters

Posted: 21 November 2019 6:14 pm
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In an attempt to offer value to its customers, the big-box retailer has rolled out installment-plan payment powered by Affirm.

Many Americans fear they will not be able to make ends meet during the season of giving. Walmart is seeking to help remedy this.

The big-box retailer is teaming up with Affirm to offer point-of-sale loan options for purchases at its supercenters. Instead of using a credit card or cash for a purchase, a customer can apply for a payment installment plan during check-out. The company also offers Affirm loans as a payment option on Walmart.com.

“We are focused on providing customers transparent, easy, and convenient ways to pay, and offering Affirm both in stores and online is one way to do that,” Daniel Eckert, senior vice president of Walmart Services & Digital Acceleration, said in a February press release. “Providing multiple ways to shop and finance select items with no hidden fees is an important way we deliver on our promise to help our customers save money and live better.”

The point-of-sale loan is available for most Walmart-sold products. An interested customer would be directed to an Affirm website, where the customer will provide his/her name, date of birth, email, mobile telephone number, and last four digits of their Social Security number into the application. If approved, the website will produce a barcode that the customer can show to the cashier for payment.

Unlike other in-store loans, the Affirm loan does not require the cashier to process any of the customer’s personal data. This offers a straightforward, private option for customers seeking in-store financing. Purchases between $150 and $2,000 are eligible and customers can choose between 3-, 6-, or 12-month terms. Alcohol, groceries, firearms, pharmaceutical items, personal care products, and money services cannot be financed with Affirm.

“Affirm is a great financing option for those customers who may prefer a fixed-term loan versus an open-ended revolving credit line to pay for larger baskets,” Walmart spokeswoman Marilee McInnis said in an email to American Banker. “We want our customers to have choices that best meet their lifestyles.”

Understanding Point-of-Sale Loans

Point-of-sale loans are not new. A facet of retail sales for decades, this type of financing seeks to encourage impulse purchasing. The idea with this type of financing is to make it easy for a customer to buy purchases that exceed their current means to pay without incurring high credit card interest or hidden fees.

“Merchants love it because now they don’t lose the customer,” Zahir Khoja, senior vice president of global acceptance at Mastercard, said to Digiday. “They can increase basket size and create loyalty with their end consumers. It gives lenders approval rates north of 80 or 90%, which they wouldn’t see today.”

These loans have become popular with e-commerce sites, such as Amazon, or with online vendors that offer high-ticket items, such as computer retailers. However, with APRs as high as 30%, the interest on these loan instruments can easily compound. Additionally, there may be penalties and deferred interest for late or missed payments.

If the loan has an APR less than your credit cards and you need to carry the balance for several months, a point-of-sale loan may make sense. However, it’s important to read and understand the fine print and to stay within your budget. As with credit cards, point-of-sale loans can easily get out of control if you spend beyond your means.

Point-of-sale loans, however, are unlikely to disappear anytime soon, as retailers see these as a way of extending value to their customers. “Imagine a scenario where the customer [is] presented with three financing options at checkout, each lender would compete for the customer’s business and all the terms would be completely transparent,” Brendan Miller, former principal analyst at Forrester and head of global marketing at payments company Rapyd, said. “The customer could choose between the private label program, Affirm, or a 30-day post-paid billing option. That would be truly innovative.”

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