Guest Column | November 7, 2022

Digital Revolving Credit: The eCommerce Gift That Keeps On Giving

By Tim Harris, CEO, FuturePay Holdings Inc.

Using Desktop Computer with Clothing Online Web Store GettyImages-1347626309

As online merchants prepare for gift-giving season, it’s an ideal time for them to assess how the financing options they offer at checkout align with their strategic objectives. Do they help build brand loyalty and foster long-term customer relationships? Do they generate opportunities for recurring sales and decrease the reliance on new customer acquisition? E-tailers want to have an ongoing relationship with customers predicated on trust, familiarity, and the best possible user experience. They count on customers making multiple purchases every year over a lifetime, not just processing “one and done” transactions. Solutions that can provide these benefits add lasting value for the merchant.

Most online financing solutions are from traditional credit card vendors or fall into the category of “Buy Now Pay Later” (BNPL) offerings. BNPL solutions provide short-term installment loans financing a single purchase, which are typically divided into four or five fixed payments. The loan is closed after the final payment is made, terminating the merchant-customer relationship.

There is an innovative eCommerce financing alternative to BNPL that adds significant benefits for the merchant. Digital revolving credit (DRC) financing options allow shoppers to open a cardless, revolving line of credit that can remain accessible indefinitely, providing shoppers with the incentive to continue to purchase from those vendors, and other vendors within the same payment network, for a lifetime. The customer can access their credit line for multiple purchases—not just for the holiday gift-giving season, but for those celebrations to come, such as Valentine’s Day, birthdays, graduations, and more. And that’s without having to reapply.

The difference between BNPL and digital revolving credit is clear: Why settle for a solution that lets shoppers pay for a one-time gift when merchants can instead offer a revolving line of credit that can finance multiple purchases forever? It can be used year-round, and for as many purchases as the customer would like to make. This approach increases average customer lifetime value (LTV).

Gift-giving provides the perfect opportunity for consumers to take advantage of a new online financing solution. Since DRC accounts are private and not tied to the family credit card, customers can comfortably make discretionary purchases. And payment options for a digital revolving credit account are more flexible than short-term BNPL installment loans which have fixed terms. In fact, DRC payment schedules can be customized to meet the consumer’s individual financial needs and can be adjusted over time as the user’s financial situation changes. This can drive up average order value (AOV) and/or reduce shopping cart abandonment rates,

In this respect, digital revolving credit can be considered a gift that keeps on giving. It has value for the eCommerce merchant, engendering recurring purchases and building customer loyalty; and to the consumer, whose purchasing power is enhanced by a flexible, private, open line of credit.

All these attributes enable eCommerce solutions providers to deliver a better value proposition to the merchants they serve. They help eTailers to build long-term customer relationships and create opportunities for recurring business. Solution providers can offer a compelling gift to their merchant clients by recommending digital revolving credit solutions that will actively help the eCommerce merchant to grow and thrive, every day of the year.