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Transforming Consumer Lending: How Big Retailers Like Walmart Are Changing the Game

Brendan Deakin
June 19, 2024

Exploring the Future of BNPL and Embedded Finance in Retail Through Innovation and Advanced Technology

The world of consumer lending has undergone significant change in recent years, and at the forefront of this evolution are big retailers like Walmart and Target. In adopting innovative lending solutions, retail giants are not only enhancing their business models but also setting new industry standards when it comes to consumer lending and technology. Tech plays a significant role in reshaping consumer lending, and strategic integration of tech for things like Buy Now, Pay Later (BNPL) and embedded financing will be key to the continued success of these corporate brands. So what are the specifics of how these global corporations are changing the shape of the industry? Read on for more details.
  • Walmart’s BNPL Initiative:
    Walmart’s integration of the BNPL program through One has dramatically reshaped consumer financing for the retailer. Their program allows customers to make purchases and pay over time with minimal hassle, significantly boosting customer engagement and sales. The flexibility offered by BNPL has made big-ticket items more accessible, and the ease of integrating it into their own systems has driven substantial growth, setting a benchmark for retailer-led lending solutions.
  • Amazon’s Consumer Lending Programs:
    Already the gold standard for online shopping, Amazon has further shifted how consumers approach online shopping with their installment payment options. By providing flexible payment terms, Amazon is able to significantly enhance customer satisfaction and loyalty. This approach underscores the impact of tailored lending solutions in driving business growth, highlighting the potential for other retailers to adopt similar models.
  • Target’s Financial Services:
    U.S. darling Target has seamlessly integrated consumer lending into their business model, making credit more accessible to more customers. This strategy has not only driven sales but also strengthened customer relationships, illustrating the benefits of embedding lending solutions within the retail experience, and paving the way for other retailers to follow suit.
  • Overcoming Tech Integration Challenges and Ensuring a Seamless Experience
    Retailers face several technological challenges, including data security, system compatibility, and fraud prevention. Successfully navigating these challenges requires strategic planning and investment in advanced technology. Risk decisioning solutions can play a crucial role in ensuring these integrations are smooth and secure, providing a solid foundation for innovative lending programs.

    Beyond the tech itself, a seamless customer experience is vital for the success of retailer-led lending (or any lending at all). This involves intuitive interfaces, quick approval processes, personalized offers, and transparent communication. Strategic technology partnerships are essential to achieving these goals, enhancing the overall customer journey and fostering long-term customer loyalty.

    But with the influx of customers and customer activity comes the data. Protecting consumer data is paramount. Not only does implementing stringent security measures build trust and loyalty among customers, but also ensures compliance with various regulatory requirements. Advanced, cloud-based risk decisioning solutions provide robust data security, safeguarding consumer information and reinforcing trust.
  • Educating the Consumer
    Retailer-led lending offers unparalleled convenience and accessibility, but educating consumers about these benefits is crucial in helping them make informed decisions and enhancing their financial well-being. Providing clear, transparent information about lending options can empower consumers and drive adoption. Make sure consumers are aware of potential risks, such as overspending and missed payments and ensure your risk strategy is promoting responsible lending practices. Promoting financial literacy through consumer education initiatives is essential – invest in resources that explain your lending programs, helping consumers understand and use these services responsibly. This not only enhances customer satisfaction but also fosters long-term loyalty.
  • Navigating the Regulatory Landscape and Future Trends in Lending
    As with all lending, retailer-led lending is subject to various regulations, including consumer protection laws and data privacy requirements. Staying informed and compliant is critical to avoiding legal issues. And this is where leveraging risk decisioning solutions can help retailers navigate regulatory complexities and ensure adherence to all compliance requirements, especially as they evolve (which they always do). With the regulatory environment continuously changing, retailers must stay ahead of potential changes by actively participating in industry discussions and advocating for favorable regulations. Monitoring regulatory trends and adapting strategies accordingly are also key to long-term success.

    The market for retailer-led lending continues to grow, with key trends including the rise of BNPL services, increased use of AI in credit and fraud risk decisioning, and expansion beyond traditional credit. These trends highlight the importance of innovative approaches and the potential for significant growth in this sector. Retailers also have numerous opportunities to tap into underserved segments, offer flexible payment options, and use data analytics to improve customer targeting. However, they must also navigate challenges such as increasing competition and regulatory scrutiny. Staying agile and adapting to changing conditions will be crucial for success (and again, this is where an integrated, holistic approach to risk decisioning can help immensely – allowing you to stay flexible and evolve with the market and consumer demands).

    AI and machine learning will continue to impact all forms of consumer lending, enabling smarter credit decisions, better fraud detection, and personalized lending offers. These technologies provide opportunities for retailers to innovate and enhance their offerings, improving the customer experience while ensuring adequate risk mitigation. Embracing innovative practices such as dynamic pricing and real-time credit scoring will further enhance the customer experience and drive business success, setting new standards for the industry.
  • What Does the Future Look Like?
    The future of retailer-led consumer lending is bright. With ongoing technological advancements and growing consumer demand for personalized, flexible payment options, big retailers are poised to lead the next wave of financial innovation. You just need the right tools to help you navigate these evolving demands successfully and ensure you can efficiently and effectively leverage technology, prioritize consumer education and experience, and navigate regulatory challenges.
What do those tools look like? Look for technology solutions that:
  • Ensure you can make accurate lending decisions in real-time: With the right data (including traditional and alternative) integrated directly into your decisioning processes, you can enable more accurate fraud and credit risk decisions and streamline onboarding for customers and new merchants alike
  • Allow you to easily adapt to regulatory changes and market evolution: Look for the ability to rapidly adjust risk strategies or launch new products with a low-code, drag-and-drop UI that ensures self-sufficiency for business users (and avoid waiting on IT and vendors)
  • Encourage financial inclusion: BNPL is often about helping the underserved and underbanked get access to credit-like products, even without a robust credit history. Make sure your solutions offer streamlined data orchestration and embedded intelligence for accurate approvals even for those with thin-file credit history
  • Enable sustainable profitability and growth: Make sure your solutions optimize your lending strategies and decisioning processes, so you can reduce bad rates, maximize customer lifetime value, and enable sustainable business growth.

This leading Buy Now, Pay Later provider struggled with flexibility and speed of accepting and processing applications, but with intelligent decisioning solutions from Provenir, they were able to improve their agility and can now make accurate decisions in real-time. Discover how.

For more in-depth information on using BNPL to ensure profitability, check out our eBook

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