GreenSky Inc. recently announced a partnership with American Express to offer alternative payment solutions to merchants and consumers. The companies aim to join American Express's large customer base with GreenSky's ability to offer point-of-sale financing options. The partnership would allow customers to finance large purchases without creating a large paper trail, making the interaction much more like a typical point-of-purchase sale.
This comes on the heels of American Express's "Plan It" feature, which allows cardholders to select individual purchases to be paid back in installments. Unlike this new partnership, Plan It doesn't charge users interest; rather, it charges a fee based on the length of the payment plan selected. Currently, only purchases of $100 or more are available through the Plan It program. The option is only available to American Express cardholders.
While some consumers view their credit card purchases as small-scale loans—borrowed money from a credit card company used to make a convenient payment in the present—the partnership between American Express and GreenSky hints that a new, alternative model may be in the works. This model would provide something much closer to a point-of-sale purchase, a transaction with which most Americans are familiar. That means consumers can expect financing in the future to feel much more like the swiping of a credit card—and it may be harder to tell the difference from the surface level as financing becomes more electronic and more convenient.
With GreenSky's current technology, customers can apply for installment-based loan financing on a mobile app and sometimes receive approval within as little as 60 seconds. Because GreenSky uses proprietary technology to make this possible, American Express's partnership with GreenSky hints at an exclusive feature that may only be available to American Express customers in the future.
American Express customers might expect more available point-of-sale financing for larger purchases, making it easier to borrow money for items like furniture, healthcare and other products that sometimes require small-scale loans. Although this partnership could disproportionately affect those who frequently fund purchases through financing, it may also hint at a burgeoning method of payment at stores that offer high-cost items.
Americans typically have to look for financing options in order to secure larger purchases, such as mattresses, healthcare and home equipment. As The Economist notes, "point-of-sale loans" are growing increasingly popular as a source of funding for Americans who want to secure these purchases.
Paying for large purchases through financing makes it possible for everyday consumers to make large purchases—so long as they have a plan in place to handle the payment terms. In the same way that consumers today can shop around for a different credit card, more financing options at the register may mean consumers might also be able to shop through available lenders in order to secure the best financing terms possible. As always, new financial products can enhance competition in the marketplace and drive financing terms lower, ultimately benefiting the consumer.