• David Caruso, Chief Commercial Officer at Atlanticus Holdings Corporation


• 16.05.2023 06:00 am
#data

In an inflationary environment where consumers are feeling more “finxiety” or financial stress than ever, there is power behind data and analytics that drive more thoughtful and tailored financial solutions that can help consumers manage this stress.

How Consumers are Reacting to Economic Volatility

We recently conducted a survey amongst Fortiva cardholders, showing that nearly 52% of respondents currently feel anxiety or stress about managing their finances due to today’s economic environment. Nearly 70% of respondents say inflation and the rising cost of living are currently contributing to their financial stress, and on a rating scale of 1-5, respondents rated inflation as having a level 4 impact on their financial stress. Perhaps most concerning to the average consumer, nearly 70% of respondents say that groceries are the area of spend where they feel the impact of inflation the most, indicating that everyday expenses are the ones becoming increasingly difficult to manage. 

With this landscape in mind, it’s not surprising that nearly 35% of cardholders surveyed are turning to buy now, pay later (BNPL) products to manage their financial stress. However, these “one size fits all'' financial solutions don’t consider the customers’ financial history and needs, nor do they have the same level of consumer protection afforded by a credit card. Consumers utilizing these products can often lose track of their payments and it is easy for something that seems like “free financing” at the point of sale to escalate into less manageable debt.

Where Data and Analytics Come In

At a time of heightened financial stress where consumers are more likely to opt into financing solutions, there is an opportunity for retailers to offer point-of-sale financing that better contemplates the consumers’ needs and their ability to pay off their purchases. This is important for consumers in the subprime market, who are more likely to face difficulty paying off short-term fixed payments offered through buy now, pay later products.

When finances are becoming more difficult to manage, subprime consumers deserve the opportunity to utilize financial solutions built with them in mind. Our second-look financing solutions leverage proprietary technology and more than 40 billion cells of proprietary training data for model development to enable our financial services and retail partners to make rapid decisions on approvals for second-look credit. These market-leading analytics are proven over multiple economic cycles with a deep understanding of the subprime market, to better predict outcomes and minimize risks that come along with lending for both the consumer and the retailer.  This informed decision-making – looking beyond just a credit score – empowers more approvals on the spot and ultimately delivers financial empowerment to consumers when it matters most. 

Providing retailers with access to this data and analytics allows them to offer more inclusive credit solutions that meet their customers exactly where they are, especially when facing economic volatility. Data and analytics give retailers the confidence they need to deliver services to this underserved market, taking into consideration the risks of lending to a subprime audience and offering them a financial solution that meets their needs. Because of this, our retail partners have consistently reported increases in average ticket size, approval rates, and repeat transactions to assist them with everyday purchases through second-look financing offered by our bank partners.

Everyday consumers comprise a vast market: almost a third of the U.S. population. At a time when inflation is disproportionately impacting this demographic, it is so important to deliver solutions that take their financial situation into account. While our survey demonstrates consumers are turning to BNPL products to manage their financial stress, there is an opportunity, now more than ever, for retailers and financial institutions to use data and analytics to power more thoughtful and tailored solutions that better meet the current needs of everyday consumers.