POS lending online

Today I would like to share the experience of the development and implementation of online lending technologies in e-commerce. I would also like to know the opinion of a respected audience about the prospects for lending in online stores, taking into account a number of circumstances and observations, which, in fact, will be discussed in this article.

For starters, you should clearly define what is being said. Credit cards and cash loans are a whole different story. In the context of working with online stores, these banking products do not make sense to consider, since they do not intersect anywhere. For the bank, the promotion of these products has nothing to do with e-commerce. There is a huge number of brokers that are speculating in this market, and the banks and credit organizations themselves are actively working on the Internet, promoting this type of credit products. It is in the market for cash loans, loans and credit cards that there are a huge number of scammers. This is a problem of any broker - a very high level of trust from the client is needed. We, as an online lending service , operate in a completely different market. Attention, under the cut a lot of boring text about loans, banks and borrowers. I apologize in advance if it will be boring.

For both offline and online retail, the most interesting is the opportunity to credit the buyer directly in the pavilion or on the store's website. In the dashing 90s, the first in Russia to use this chip were creative and adventurous guys from the Russian Standard Bank. And in the beginning of the next decade, the bank had just a huge portfolio of consumer loans issued using the POS-lending technology.
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POS-crediting (from the English. Point of Sale) is a technology of crediting buyers directly at points of sale (for example, in shop pavilions), based on the ability of a buyer to quickly get a decision on a loan. The main reason for the popularity of such loans among customers is the desire of the person who saw the product to purchase it as soon as possible. It should be noted that for a bank a borrower who takes a POS loan is less “risky” than taking the same amount in cash or a credit card (which is actually the same thing when cashing a credit card). Who will cause more suspicion of fraud: a person who buys a washing machine on credit, or who takes a cash loan for the same amount? The borrower who buys the washing machine causes more trust from the bank for obvious reasons - it is more socially transparent. He has where to put this washing machine, he has what to wash in it, there is money for clothes and washing powder, etc. Therefore, POS loans are generally characterized by a high percentage of approval. As for interest on loans and overpayments, our banks have a clear conscience for sure - they still get super profits on POS loans. If you compare the interest on POS loans, for example, in Germany and in Russia, you can spoil your mood (if you are not a banker, of course) - the numbers differ by an order of magnitude.

How does all this relate to e-commerce and online shopping? Like any technology that makes a profit offline, 2-3 years ago, POS-crediting appeared on the Internet, namely in online stores. After sitting over their calculators, creative bankers figured out how many credits could be issued on the websites of major online stores, and began to spud them for the introduction of the opportunity to buy on credit. For Bank POS-loan in the online store has several obvious advantages:

• You do not need to have a staff of credit specialists at points of sale
• Online store buyers are a more attractive category of borrowers
• Huge compared with the point of sales audience online stores

At about the same time, brokers appeared, offering loans to shops from several banks at once, 99, (9)% probability of approval, as well as various technical solutions for integration into the store's website. This is how the online lending market appeared in online stores. We can identify the main drivers of growth of this market:

• The interest of the online store in enhancing the purchasing power of the visitor due to the possibility to buy goods on credit.
• Interest of the bank in promoting its own loan products, increasing the loan portfolio, obtaining new customers and leads.
• The growth of the entire e-commerce market and the audience of online stores.

But as it turned out a couple of years later, not everything is so simple. In addition to all the obvious advantages and prospects, there were quite specific difficulties. To understand their nature, it is necessary to look from the outside at everything that happens: how much we are trying to combine incompatible things. On the one hand, lending technologies (Banks), where all procedures should be formalized as much as possible, and the risks calculated with an accuracy of tenths of a percent. On the other hand, domestic online retail, where there’s no need to conceal, much is being done on the knee, at random, at random, where there are neither funds nor planning time, deadlines are constantly disrupted and conditions are violated. The smaller the store, the more problems with it. If you already call a spade a spade, any dolt can take a loan, hire a programmer, a salesperson and a girl to take orders, book a site for a week, rent an office and is ready. In varying degrees, 9 out of 10 stores in RuNet represent something similar. Sometimes something comes out of it, and sometimes it doesn't, and the store starts to make a profit, but, as a rule, it all works until the first serious joint. Working with such partners is unprofitable and risky for the Bank, for the Buyer and for the Broker.

It should also be recognized here that the demand for online lending service from online stores turned out to be an order of magnitude lower than expected. As a rule, they simply are not up to it. Flow and debris taking is 90% of the time, so there is no time to think about any new technologies. Especially, if their implementation imposes any responsibility on the store (although in our case it is just a duty to deliver the goods paid by bank transfer in time).

From the side of the banks, everything is far from smooth. First of all, bureaucracy. It is necessary to go through all nine circles of hell in order to conclude an agreement with the Bank and get the opportunity to sell on credit. In principle, there is no possibility to sell on credit to buyers from other regions. The likelihood of approval is much lower than in a regular store. All this concerns the 5 largest banks in Russia in terms of POS loans issued in 2012. I have no experience with others, but I think that the situation there is no better. The internal system of procedures of the bank was created for offline, that is, in order to issue loans for iPhones at 75% per annum in some Eldorado. In the Internet, this model will not work, because here the buyer has a different level of trust and financial literacy.

And now, as the last nail in the coffin - logistics. The root of evil and the source of problems for any business in Russia. For the Bank or the Broker, the delivery and signing of a loan agreement with the client are certain (and considerable) expenses. But most importantly, these costs may be in vain if the customer refuses the goods or the store cannot ship them. Logistics greatly increases the level of risk and imposes additional responsibility on the online store. Often, this responsibility becomes the main reason for refusing to sell on credit. Everyone is struggling with this misfortune as they can: someone creates his own courier service, someone outsources the delivery, someone forces the buyer to stomp into the bank branch, and someone, aware of all the risks, generally accepts credit scans for payment.
Conclusion: both banks and brokers and shops are stalled in the POS-credit market on the Internet.

As you can see, in 2-3 years of work in this market, a lot of problems have accumulated. And with each of them have to fight in their own way. There is a truth encouraging moment: in spite of all the difficulties listed above, the service to buy on credit is definitely popular with buyers. This is evidenced by the dry statistics: on average 8 sales of any online store, on average there is 1 credit sale. Buyers use the opportunity to buy on credit, if there is one. The growth of the market is hindered by something else: too “slow” banks and too “fast” stores cannot create conditions for more effective interaction with each other.

To come to this conclusion, it took us 2 years of hard work. Based on the fact that the service “Buy on Credit” is currently most needed by the buyer (not the Bank and not the store, as we assumed when launching the project), we want to shift most of the actions necessary for processing a loan application to the buyer. It is the buyer who must tell us that he wants to buy on credit, and then we have to process his application. Thus, the task at the moment is to enable the buyer to quickly and conveniently get a number of lucrative offers on loans for the goods of interest, as well as to convey information about this opportunity to every second buyer. We have everything for this, except the money for advertising is “enough” of a large flow of applications. In order to increase it, we make various attempts to find solutions in “other planes”. At the moment we are considering the following options:

• Browser application Market Navigator
• Separate site with a loan application form
• Mobile app (?)
• Installing Conpay.ru button on the sites of large stores

Each of the options requires, above all, competent and expensive marketing. We try to "test" each of them with minimal cost. Perhaps there are other solutions that we have not even thought about. Our team will be especially grateful to the distinguished audience for comments on this issue.