Versatile Credit CEO: Economic Uncertainty Drives Pay-Later Merchant Benefits

Here’s the net-net on the pay-later economy: The predictability of paying for purchases over time in fixed monthly installments is appealing to consumers who value the ability to manage their personal cash flow. But what do merchants like about it? As Versatile Credit CEO Ed O’Donnell told Karen Webster, merchants are using credit to drive sales.

Versatile Credit, partnering with dozens of lenders to deliver financing options at the point of sale, has seen a steady drumbeat of merchants signing up to broaden the payments choices they can offer customers, who have spending power and credit “dry powder” to keep commerce going.

The platform, he noted, presents an opportunity for consumers to finance their chosen purchases  with enterprises that might not have previously been able to offer a range of credit options. Application volumes, as measured in January and February of this year, are up year over year, said O’Donnell.

“We’ve seen recovery in the verticals where we play today,” he told Webster as part of the PYMNTS on Air event, “BNPL: Pay Later Unpacked,” adding that “consumers are still being intelligent about how they use financing — short-term financing and promotional financing — to help make the purchases that they feel they need to make or they want to make.” That’s especially true of younger consumers who want to avoid interest payments that will turn a $1,000 purchase into a $3,000 transaction over several years.

And against that backdrop, said O’Donnell, no matter the type of plan on offer, “people want certainty — especially in an environment where, economically, things are a bit uncertain. Planning is important and confidence is important — [and with pay later] you can create your own confidence within your own budget.”

Shifting Profiles

The profiles of the merchants connecting to lenders via the Versatile Credit platform are changing too.  O’Donnell noted that a few years ago, larger retailers dominated; now that’s shifted to include small and mid-sized businesses. Providers such as O’Donnell’s firm also offer white-label offerings so that lenders can bring far-ranging credit offerings to merchants.

“When we started,” several years ago, said O’Donnell of Versatile Credit, “as just the supply side of the business — we could route consumer data to willing lenders and they could make credit decisions. It was all pretty much done in a vacuum.” But newer data driven models marry different subsets of information to predict how people will pay.

“If I’m on the lender side,” said O’Donnell, “I can be more aggressive with a general credit box if I pair up with other lenders, and if I’m on the merchant side, now I don’t have to be a larger enterprise to go out and get a really comprehensive credit programs — without ‘a big spend,’ and lenders support me coming onto the Versatile platform to get the same credit products that big enterprises have available to them.” The net impact is that there’s a swath of lenders presented to the end customer, from banks offering credit lines of several thousands of dollars down to short-term, buy now, pay later (BNPL) products.

“They’re complementary rather than completely competitive, the way it used to be,” O’Donnell told Webster, which in turn enables consumers to pay for elective medical procedures or home improvement products.

The actual connectivity between the lender and the merchant has shifted with the boon of technology too, said O’Donnell, who told Webster that the traditional, age-old, paper-based onboarding and manual underwriting has been improved by alternative data and artificial intelligence (AI). And that, said O’Donnell, can help speed the financing of, say, fixing a hole in the roof when the contractor’s standing in the middle of the kitchen, and the homeowner has to decide what to do.

“Showing and telling the customer [what’s available] and bringing technology into that compliant flow guarantees that the consumer is getting all the disclosures they need — and that the best available products are being put in front of them so they can say yes or no … every screen and sentence that’s disclosed in the credit process is approved by compliance and legal departments.”

The enhanced data and risk analysis also means, said O’Donnell, that lenders can expand the consumer populations they reach — as a traditionally subprime lender, for example, can move “upscale” and make offers that they might not have gotten in a different era of lending, and thus capture profitable, loyal (and new) prospects.

“The ability of merchants to offer more products will drive sales,” said O’Donell, “and that’s going to hold true even if things get a bit more chaotic and uncertain. The consumer also values having choices.”