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BCBG Offers Microfinance Payment Option To Entice Millennial Shoppers

With as many as 63% of Millennials not owning a credit card, retailers now have to find new ways to engage this demographic, particularly when selling high ticket items.

As the holiday season kicked into gear, BCBG Max Azria implemented a new payment option, designed to allow consumers to pay for products with a virtual card in monthly installments as opposed to all at once. To integrate this payment process, referred to as “microfinancing,” BCBG hired payment solutions provider Affirm. The retailer officially deployed Affirm on BCBG.com on Nov. 18, and on BCBGeneration.com on Dec. 4.

Given that a large portion of BCBG’s target demographic are Millennials aged 18 to 34, the retailer wanted to ensure that all of these consumers had the opportunity to purchase a dress, boots or jewelry during the biggest gift-giving season of the year.

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“When I first saw Affirm, it dawned on me that this is a great solution for our consumers, particularly when I saw what demographics the company had been targeting,” said Michelle Magallon, SVP of Digital Commerce at BCBG. “Our price points are higher than some of the other brands the consumer shops at today, but if she desires to wear BCBG, this is an opportunity for her to get into the BCBG product through a very affordable payments program.”

Affirm is designed to let shoppers pay for purchases over different lengths of time, instead of directly up front, with transparent, simple interest loans. Any interest fees and monthly payment amounts are disclosed to shoppers before they transact, so they can make an educated decision about whether these costs fit into their budgets.

“If a shopper gets approved for a dress for $500, she immediately gets options that say she can pay for it in three, six or 12 months,” Magallon said in an interview with Retail TouchPoints. “In that case, she knows right then and there what she’s going to pay for that dress for the next six months, if that’s what she decides. In terms of her being able to understand budget and impact, it is an easy way for her to make a decision on an installment plan.”

This kind of alternative can be a major benefit for consumers who aren’t looking to tie themselves up into another credit card, especially since these cards typically charge compounding interest and numerous extra fees, and often tack on dubious promotional offers.

Consumers can apply for a loan through Affirm without a traditional FICO score. The platform enables consumers to create an account simply by providing information including:

  • Name;

  • Mobile phone number;

  • Birthday; and

  • Last four digits of their social security number. 

Using these details, Affirm can then access and evaluate thousands of pieces of data about the applicant to determine their ability to repay, with an approval decision rendered in seconds. Based on the credit evaluation, the purchase will include a monthly interest rate within a range of 10% to 30% APR. 

Once approved, Affirm settles directly with the merchants within one to three business days at a 2% to 3% charge, taking on all the repayment and fraud risk.

Bringing Microfinance To The U.S.

The inspiration to bring Affirm to the BCBG e-Commerce sites came from Magallon’s past experiences working in Costa Rica as the Chief Marketing Officer of Aeropost. Microfinance is a popular form of payment in regions of the world outside the U.S., particularly in lower income areas where larger bulk payments aren’t as feasible.

“I’ve worked in Latin America and knew about the fact that microfinance is part of everyday culture there,” Magallon stated. “For example, if you’re in Colombia, you can pay for your Big Mac in up to 12 installment payments.”

With the reliance on credit cards in the U.S. declining since 2008, it is very possible that microfinance will become more of a viable option for consumers, especially if it gains more publicity.

“I think payments will continue to evolve in the U.S.,” Magallon concluded. “One of the things we have on our road map for 2016 is to continue to implement more payment solutions and options for the consumer, and give her whatever form of payment that her preference and comfort level is. When you see a payment solution like Affirm, it fills a gap in the domestic marketplace for payments, and we have a high expectation for it going forward.”

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