JPMorgan Chase enters a hot fintech space: point-of-sale financing
JPMorgan Chase announced that it is moving into the point-of-sale financing market. According toThe new 'My Chase Plan' financing option allows card customers to select from past purchases of more than $500 and finance them over a longer period with monthly fees, rather than interest-based repayments. The bank is also upping its game in the consumer lending space via 'My Chase Loan', which will enable card customers to borrow against credit lines to fund larger value items.
There may be"fresh" data showing non-banks' rising market share, but that's driven mostly by mortgage and small business lending. Chase's move into POS financing is driven by other factors--factors that many financial institutions appear to be overlooking.POS financing certainly isn't new. In 2016, merchants in nine different retail categories saw more than 160 million POS loan applications—only 53% of which were approved, however.
More than a quarter of consumers have used point-of-sale financing when shopping online. More importantly, nearly half would like to be presented with the option to get instant financing when shopping online.According to Filene, more than one in five Millennials between 25 and 34 years old expect to apply for, or increase their level of debt for home renovation/repair loans, and 13% will take on additional debt for home electronics over the next three years.
A few large banks are certainly in the market. At four of the largest banks playing in the POS financing market, year-over-year growth between Q4 2016 and Q4 2017 ranged from 65% at Regions Bank to 123% at Fifth Third Bank as all four exceeded the $1 billion in loans in the quarter.But many mid-size banks and credit unions appear to be sitting it out. In Cornerstone Advisors' 2019
study, just 3% of banks and 12% of credit unions said that point-of-sale loans would be a high priority in 2019.New players have entered the POS financing market in recent years bringing not just digital capabilities to the table but new business models—platforms—to introduce efficiencies and opportunities to the market:Founded by PayPal co-founder Max Levchin, Affirm caters to underserved or underbanked Millennials.
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