U.S. consumers have for decades relied on a mix of credit cards, home equity lines, and personal loans when purchasing large ticket items, with the credit card particularly entrenched as the preferred pay-over-time product.
But as reported in Packaged Facts’ newest study, “Point-of-Sale Installment Loans: The U.S. Market and International Perspectives, with COVID-19 Market Impact Assessment”, fintechs have been developing novel and highly successful point-of-sale (POS) installment loan products, initially but no longer exclusively for e-commerce, shucking off familiar processes and payment forms.
Directing their solutions to structural points of friction in the payments industry, these financial technology companies are imagining new processes (not just improving old ones) that create greater convenience and value for consumers – and yield sufficient value to merchants to more than offset the hefty percent of sales that fintechs charge them.
POS installment lending in the U.S. will therefore grow from $391 billion in 2015 to a projected $972 billion in 2020, according to Packaged Facts, for a compound annual growth rate of nearly 20%.
By next year, however, the aftershocks of the current coronavirus pandemic will fully be felt. Report author Elizabeth Rowe therefore sees the market facing a significant setback in 2021, as the corrosive effects of a global recession if not depression set in, along with fintech players’ tactical responses to the changed economic and consumer credit landscape.
Many companies in the sector are fueled by private capital interests that may or may not be willing to support the petri-dish experimentation of credit strategies that has characterized this new consumer credit industry. “None of these companies has lived through an economic crisis,” explains Rowe, “and while this industry segment benefited from the after-shocks of the Great Recession, their own business models haven’t been stress-tested by a major downturn.”
Even so, the report argues that prime and super prime credit consumers will tend to return to that credit status, despite the significant personal finance setbacks that will follow from the COVID-19 economic downdraft. This means that prime+ debt they hold today may take a while – maybe even a long while – to be paid off, but that payoff will indeed happen.
Packaged Facts therefore projects the U.S. point-of-sale financing industry to claw its way back to aggressive double-digit growth, thereby approaching $2 trillion in revenues by 2025.
Source: Packaged Facts
