Instant Credit Fuels Online Shopping, According To Report
A new survey indicates that Americans are getting more comfortable with the idea of instant financing when they’re shopping online. Seventy-five percent of folks said they would choose to buy from an online merchant offering instant financing, rather than one that did not, if given the option. And 28% said they would switch stores if they could use instant financing to fund their purchase.
Instant financing differs from a low-APR credit card in that it allows consumers to apply for credit during the online purchasing process. It’s a revolving line of credit that lets folks spread their payments out over time, and functions as an alternative to debit or credit card purchases.
“Instant financing is more than simply a convenience to consumers making online purchases,” explained Jim Lofgren, general manager of Klarna North America, which provides instant financing options to merchants. “It gives them additional freedom, flexibility and buying power that they find very attractive.” Lofgren said the survey showed that instant financing could drive “significant business” to merchants.
The study included responses from 2,024 people ages 18 and over, located across the United States. Thirty-nine percent of those polled said they would be inclined to spend more money if they could use instant financing, although 42% said they definitely would not, and 19% weren’t sure.
Credit cards still have the edge for mobile purchases
One problem with applying for instant financing when shopping online is that it’s difficult to fill out all the required information on a smartphone. So, if you’re shopping online, you’re better off using a low interest credit card that you already have saved to your mobile wallet.
Respondents said it was “too much trouble” to enter a social security number, bank account number, or credit card number on their smartphone. They were more willing to enter their email address, birthday, or spouse’s name – all things that might typically be asked for when applying for instant financing.
Another way credit cards are preferable is that they offer rewards and benefits that instant financing does not. Cash back, miles, purchase protection, and price guarantees are just a few of the incentives to choose a low APR credit card instead of instant financing when shopping online.