As shopping goes mobile, retail sales models adapt

Mobile commerce must support larger and more complex shopping categories to take the next step, and some companies are looking to enable this through alternative financing.

Among them is the five-year-old FuturePay, which this month joined the Salesforce Partner program, which uses a cloud structure to help merchants build marketing and customer service over different channels. This follows FuturePay's earlier development of an in-store version of its e-commerce installment payment program.

FuturePay hopes to sign up merchants by retaining the consumers who would otherwise decide not to buy larger item because it's too expensive to purchase on an app.

"Things have changed significantly over the past 18 to 24 months, and I don't think it's just one thing that's causing it," said Bobbi Leach, CEO of FuturePay. "There's a lot more traction for millennials, who have the lowest level of credit card ownership but also have the highest level of shopping online."

The combination of marketing, sales, payments and providing a credit card alternative for larger purchases is not new. Stores have offered installment payments for years. It's also not new for companies that sell online to offer installment payments, particularly in Europe, though it's relatively new in the U.S. for digital channels.

What is new, Leach said, is the rush of physical stores that want an online or mobile presence to complement their retail footprint. That requires consumers to make decisions away from a personal interaction with a store clerk, often involving how to pay for a larger item.

If consumers aren't at the store, they may not think they can make a larger purchase without an available credit card balance, Leach said. In that case, even a well-designed mobile app with a good user experience and the personalized touch of a CRM program can't make the sale.

Other companies that offer alternative payment options at digital points of sale are also getting more aggressive. Klarna, which offers quick financing decisions at the point of sale in an omnichannel environment, this week drew investment from Visa. That investment is considered a local play for Klarna's Swedish market, but Klarna has substantial global ambitions, including building a market in the U.S.

Splitit links its service to Magento's open source platform to power installment payments amid a menu of broader marketing and merchant services. Other companies such as Insta have dabbled in using the installment model for P-to-P transfers, an unusual case for installments, which are usually applied to retail purchases.

And the card networks are getting more active. In addition to Visa's stake in Klarna, Mastercard has partnered with Verifone on installment payments.

One impetus is the expanding use of mobile devices to shop and pay, creating a need for more payment alternatives in the mobile channel.

"Consumers are more likely to finance larger purchases and lenders are more willing to finance larger purchases, so there is a mutual benefit to increasing ticket size when it comes to alternative financing," said Brad Margol, a principal at AZ Payments Group. "However, consumers are still hesitant to adopt many alternative financing solutions through the mobile channel. They just aren't comfortable signing up for financing on their mobile devices. "

In a more competitive environment, there will be a greater diversity of payment and financing options at the point of sale, Margol added.

"The main benefit here is for consumers to be able to act fast in finding another source of credit," Leach said. "This alternative source of funding allows people to make that purchase in that moment, as they are shopping."