Banks and businesses generally expressed cautious optimism about consumer spending during the first quarter earnings season.
Now, the substantive question concerns the availability of credit against the balance for the second quarter of 2024 and the rest of the year. Will consumers want to borrow to keep up with their spending? If so, will lenders be responsive? As his CEO of Versatile Credit, Ed O'Donnell, told his Karen Webster, now is the time to hold firm.
“All signs point to steady state,” O'Donnell said. “I don't see any dramatic changes.”
Interest rates remain high and a rate cut may not happen soon. Although delinquencies are creeping up, credit trends are normalizing and consumers still have some dry powder on hand in terms of credit lines and overall borrowing capacity.
“We're not overcooking anything,” O'Donnell said.
Willingness for large-scale loans
“We're still seeing growth in almost every area across the platform,” he said of Versatile Credit, which partners with more than 30 lenders to provide financing for big-ticket purchases from furniture to home improvements.
An increasing number of homeowners are choosing to keep their existing properties at relatively low mortgage rates. Rather than considering driving a stake and moving into a new home, they are moving toward home improvement projects.
That's not to say that nothing has changed for retailers to reach online shoppers. O'Donnell noted that many of the platform's lenders are offering loans “a little differently” and are tweaking their lending efforts. Perhaps they are reducing the length of their zero interest rate promotions, but by and large they are still competing with each other for a share of consumers' wallets.
Versatile Credit's data-rich platform provides detailed insights into consumer, merchant and lender behavior for competitive and disciplined underwriting. This interconnection fosters a more efficient consumer lending ecosystem, allowing merchants to integrate with each lender on his one-to-one basis and avoid waiting for approval and potentially losing sales in the meantime.
O'Donnell said Versatile Credit is moving towards simplifying the registration process, with an integrated application for merchants that allows retailers to apply once and provide all relevant information to lenders, who then process the loan. You will be able to decide on products and pricing.
The benefit for lenders is that they can leave compliance and regulatory considerations, such as fee transparency disclosure, to the platform, he said.
“It’s important that we leverage technology to bring a more compliant and repeatable process to sales,” he said, adding that “every screen we deploy and every part of our disclosure statement is designed to help lenders, The most up-to-date and compliant information available on the market as it has been approved by its operators, lawyers.”
O'Donnell said Versatile Credit is evolving beyond its roots as a credit aggregator to become an information and performance aggregator. This information includes merchant-level data that helps lenders extend more lending options to their most powerful retailers. Versatile Credit's lending partners are asking the company to provide a scoring model that fleshes out merchant behavior across social media channels, financial issues, and even consumer complaints and dislikes.
“Lenders are likely to take on more risk if there are strong merchants, but if the merchant's performance looks a little troubling, the exposure will be reduced,” he said.
Demand for installment payments is increasing
O'Donnell said retailers are reflecting the times and are willing to offer more installment loans over longer terms to keep consumers paying less.
“If you're getting new windows or a new roof or an important medical procedure, paying for it is very important,” he says.
Looking ahead, there could be increased vigilance on the part of consumers considering financing everything from sofas to dental implants. Mr O'Donnell said lending products will “evolve to support more convenient and lower payments where possible…so people understand what they're getting into and feel comfortable making payments.” “Everyone has a vested interest in doing so.”
