Point-of-sale (POS) funding technology platform ChargeAfter and Japanese venture capital firm MUFG Innovation Partners (MUIP) announced plans for a strategic investment to provide global e-commerce and brick-and-mortar retailers with the technology and tools to approve more applications for POS financing from multiple lenders in real-time.
The investment and partnership will further promote ChargeAfter’s rapid global growth and accelerate the commercial distribution of ChargeAfter’s white-label, point-of-sale financing technology platform to global banks, lenders, issuing banks, and acquirers.
ChargeAfter uses a data-driven decisioning engine and a growing network of global lenders to provide a larger number of competitive financing offers from the most appropriate lenders for the consumer’s credit type (prime, near-prime, and subprime) with approval rates of up to 85% of applications.
“ChargeAfter created the next wave of credit by connecting merchants and lenders to provide consumers with personalized Point of Sale Financing options from multiple lenders, live and instantaneously at checkout,” said Meidad Sharon, CEO of ChargeAfter.
“Our vision is to help global consumers gain access to financing options that best fit their unique backgrounds and needs, and that are available to them wherever and whenever they are ready to purchase: online, mobile, in-store and over the phone,” Sharon added.
$6 trillion global POS lending market
As Payments Next reported recently, new technology and innovations are increasing competition for the fast-growing POS lending market in the US and abroad. Filene Research estimates the annual size of the POS finance market in the US at $391 billion – about 3.5% of annual consumer spending – with healthcare, electronics, and home furnishings products the most popular consumer categories. The global POS finance market is estimated at $6 trillion.
Banks and merchants use ChargeAfter to provide consumers a simple, four-data-point credit application at checkout. ChargeAfter’s decisioning engine processes the credit request across its lender network to find personalized, approved financing offers for the consumer.
The company said this leads to increased consumer adoption, more approvals, and higher sales for the merchant by providing the financing product and tools needed to deliver instant, flexible credit options from multiple lenders with a fast, positive user experience.
“Dealing with multiple lenders is a huge challenge for both the merchant and the end customer. In ChargeAfter’s approach, a shopper is matched with offers from a diversified network of lenders in real-time, providing an optimized offer to each customer without requiring any additional efforts from the merchant. We believe that ChargeAfter’s model has global potential and can be applied to other verticals within financial services to provide the best fit solution to customers when they need it.” said Mayank Shiromani, VP, MUFG Innovation Partners.
POS lending growing in popularity with consumers
McKinsey estimates POS lending growth doubled between 2015 and 2019, taking an estimated 3% of growth from credit cards and the traditional lending market.
In 2018, McKinsey said total US outstanding balances originated through POS installment lending solutions were $94 billion and expected to exceed $110 billion in 2019 and account for around 10% of all unsecured lending.
While the recent coronavirus crisis may have impacted consumer buying preferences, POS lending was growing at an average of 20% annually. It’s also growing in popularity for lower-cost purchases with shorter payment duration in addition to traditional more expensive purchases.
“Newer entrants, such as Afterpay, Klarna, and Sezzle, are displacing credit card spending more directly. Purchasers with ticket sizes as low as $200 to $300 are shifting to shorter-tenure (four- to six-week) POS financing. These smaller-ticket (less than $500) POS loans, which are estimated to total $8 billion to $10 billion in 2019, are growing at rates exceeding 40 to 50%,” a recent McKinsey report noted.
Founded in 2017 and headquartered in Sunnyvale, CA, ChargeAfter provides leading e-commerce and omnichannel retailers a point of sale financing technology platform to offer personalized financing options from multiple lenders in a single application. Other investors include PICO Venture Partners, Propel Venture Partners, VISA, BBVA, Synchrony, and Plug and Play VC.
Headquartered in Tokyo, Mitsubishi UFJ Financial Group (MUFG) is the world’s fourth-largest bank with 360 years of history, over 2,700 locations in more than 50 countries, and 180,000 employees.
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